cloudyn.png
Monday January 17th, 2022 3:07AM
12:00AM ( 3 hours ago ) News Alert

Bank of England holds rates steady, confounding expectations

By The Associated Press
Related Articles
  Contact Editor

LONDON (AP) — The Bank of England confounded market expectations and held U.K. interest rates steady Thursday, saying it wanted to see what happens to unemployment after the British government ended a program that subsidized worker pay during the coronavirus pandemic.

The decision to keep the bank's main interest rate at 0.1% was a surprise given the sharp pickup in consumer prices in recent months as a result of high energy costs, labor shortages and other factors as the global economy recovers from the pandemic.

“It was a very close call,” bank Governor Andrew Bailey said in a briefing. “We are in a situation where the calls are close, they're quite hard, but that's just a reflection of the position we are in.”

Financial markets had been increasingly pricing a rate rise to 0.25% over recent days, prompting some mortgage lenders to withdraw some of their cheapest loans. Market reaction to the decision was instant, with the pound selling off sharply against other currencies. Against the dollar, it was down 1%, at $1.355.

The central bank's decision kept it in line with other leading economies, with the European Central Bank and U.S. Federal Reserve recently leaving interest rates unchanged. The Fed, however, announced Wednesday that it would start winding down a stimulus program it put in place during the pandemic to keep a lid on inflation.

The vote by the Bank of England's rate-setting Monetary Policy Committee was 7-2 in favor of keeping the rate unchanged. The two members who voted for a hike said it was necessary because of strong domestic and global cost pressures, according to minutes accompanying the decision.

For the majority, there was “value” in waiting for further information about the labor market following the end of the government salary program “before deciding when a tightening in monetary policy might be warranted.”

For much of the time the program was in place, the government paid 80% of the salaries of employees unable to work because of lockdown measures. At its peak, it helped support over 11 million people, but with many workers returning to their jobs after pandemic restrictions lifted, that fell to a little more than 1 million at the end of the program in September.

Though the bank opted against hiking rates and said many of the factors behind the recent spike in consumer prices are “transitory,” such as higher oil and gas prices, it made clear that it intends to lift borrowing costs in the “coming months” to help bring inflation back toward its annual target of 2%.

Economic forecasts accompanying Thursday's decision showed the bank expects inflation to rise from 3.1% to 4.5% in November, then to about 5% in April, which would be the highest level in a decade. Inflation would then undershoot the 2% target in three years if interest rates rose to around 1% by the end of 2022, as markets are expecting.

The bank also slashed its growth forecasts for the British economy amid supply chain problems tied to disruptions caused by the pandemic and Britain's departure from the European Union. That was evident in the recent long lines seen at gas stations amid a shortage of truck drivers.

As a result, the bank expects the British economy to return to its pre-pandemic level by the first quarter of 2022 after previously predicting a recovery by year's end.

Many economists think the bank will raise interest rates on Dec. 16 after its next policy meeting, by which time it will have more information on unemployment.

“We expect a hike in rates to come through in December, when policymakers will have at least some tentative evidence on how employment has performed after the expiration of furlough," said Luke Bartholomew, senior economist at investment company abrdn.

Alongside the rate decision, the bank's monetary panel kept its pandemic stimulus program unchanged at 895 billion pounds ($1.2 billion), though the vote was split 6-3. That program is due to expire at the end of the year.

  • Associated Categories: Associated Press (AP), AP Business, AP Business - Economy, AP Business - Financial Markets, AP Business - Industries, AP Business - Financial Services
© Copyright 2022 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Bank of England holds rates steady, confounding expectations
The Bank of England has confounded market expectations and held interest rates steady
8:17AM ( 9 minutes ago )
UK Conservatives back down on lobbying plan overhaul
Britain’s Conservative government has backed down on plans to overhaul lobbying rules for lawmakers amid a furious backlash over efforts to abolish the independent system to police the conduct of members of the House of Commons
8:13AM ( 13 minutes ago )
Moderna lowers forecast for 2021 COVID-19 vaccine deliveries
Moderna is scaling back expectations for the number of COVID-19 vaccine deliveries it expects to make this year
8:11AM ( 15 minutes ago )
Associated Press (AP)
Countries pledge to phase out climate culprit coal
Several major coal-using nations are pledging for the first time to phase out their use of the heavily-polluting fossil fuel to to speed up their plans to do so
7:04AM ( 1 hour ago )
Vietnam seeks information from Iran about seized oil tanker
Vietnam is seeking more information about a Vietnamese oil tanker that was seized at gunpoint last month by Iranian soldiers in the Gulf of Oman, while vowing to ensure the safety and humane treatment of the ship's crew members
6:51AM ( 1 hour ago )
Pressured by Biden, OPEC+ meets to decide oil production
The oil-producing alliance known as OPEC+ is meeting to decide how much oil to pump
6:36AM ( 1 hour ago )
AP Business
Asian shares rise after Fed says economic aid will wind down
Asian shares are rising, boosted by the U.S. Federal Reserve's announcement on winding down the extraordinary aid for the economy it has been providing since early in the pandemic
2:57AM ( 5 hours ago )
Fed pulls back economic aid in face of rising uncertainties
If you find the current economy a bit confusing, don’t worry: So does the nation’s top economic official, Federal Reserve Chair Jerome Powell
12:24AM ( 8 hours ago )
Supply chain delays disrupt California agriculture exports
California farmers say they are having trouble exporting their crops because of delays in the global supply chain
8:38PM ( 11 hours ago )
AP Business - Economy
Officials tell AP that Iran seized Vietnamese oil tanker
Iran has seized a Vietnamese-flagged oil tanker in the Gulf of Oman last month and still holds the vessel off Bandar Abbas
1:08AM ( 7 hours ago )
US government works to 'cocoon' old nuclear reactors
Costs to clean up a massive nuclear weapons complex in Washington state are usually expressed in the hundreds of billions of dollars and involve decades of work
12:05AM ( 8 hours ago )
Paid leave, immigration, tax changes added to Biden bill
House Democrats have added paid family and medical leave, immigration law changes and a state-and-local tax break to President Joe Biden's $1.75 trillion social services and environmental bill
8:12PM ( 12 hours ago )
AP Business - Industries
UK homeowners brace for potential interest rate hike
British homeowners and borrowers are bracing for a possible interest rate increase from the Bank of England
10:37AM ( 21 hours ago )
Stocks open lower on Wall Street, edging below record highs
Stocks are opening slightly lower on Wall Street as investors look over another big batch of earnings reports from U.S. companies, which contained some disappointments
9:45AM ( 22 hours ago )
UK tells private sector it must invest big to save planet
Britain is calling for the world’s financial industry to channel its vast funds toward greener investments to ensure that efforts to curb global warming succeed
7:00AM ( 1 day ago )
AP Business - Financial Services
UK Conservatives back down on lobbying plan overhaul
Britain’s Conservative government has backed down on plans to overhaul lobbying rules for lawmakers amid a furious backlash over efforts to abolish the independent system to police the conduct of members of the House of Commons
8:13AM ( 15 minutes ago )
Moderna lowers forecast for 2021 COVID-19 vaccine deliveries
Moderna is scaling back expectations for the number of COVID-19 vaccine deliveries it expects to make this year
8:11AM ( 17 minutes ago )
Netanyahu's hopes for a comeback dim as Israel passes budget
Former Israeli Prime Minister Benjamin Netanyahu has watched from the sidelines as the government that toppled him after 12 years in power passed a national budget, dealing a major blow to his hopes of a swift comeback
8:02AM ( 26 minutes ago )
Nigeria building collapse deaths climb to 36, dozens missing
The number of bodies recovered from a collapsed high-rise apartment building in Nigeria’s most populous city has risen to 36, an emergency official told The Associated Press
7:47AM ( 41 minutes ago )
Iran marks anniversary of 1979 takeover of US Embassy
Thousands of Iranians have gathered on the streets of Tehran for the anniversary of the 1979 seizure of the U.S. Embassy
7:44AM ( 43 minutes ago )