The Bank of England followed America’s lead with a 25 basis point hike as hotter-than-expected inflation data outweighed concerns over banking instability, according to the latest announcement from the Bank of England.
- “The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 22 March 2023, the MPC voted by a majority of 7–2 to increase Bank Rate by 0.25 percentage points, to 4.25%.”
- The two dissenting voters were for a pause in rate hikes.
Inflation Over Instability. Earlier this week the consumer price index for February increased to 10.4%, above the 9.9% consensus forecast and up from 10.1% in January. This clearly weighed heavier on the MPC than the current concern about the global banking system after the failure of SVB in the US And Credit Suisse in Switzerland.
Standard Of Living. Thanks to continued support from the government to help citizens pay energy bills, the standard of living in the U.K. is likely to remain flat in 2023. A big reversal from the high inflationary environment of 2022.
- “As the Government’s Energy Price Guarantee (EPG) will be maintained at £2,500 for three further months from April, real household disposable income could remain broadly flat in the near term, rather than falling significantly.
Follow The Pack. Last week, the European Central Bank raised their benchmark rate by 50 bips to 3.0% and the US on Wednesday raised rates by 25 bips to raise the federal funds rate to 4.75-5.0%.