All Eyes on the England’s Monetary Policy

Harvest Global Markets :

Hike! Hike! Hike! – The most popular word of the market these days. The monster of the inflation has been unleashed onto the word after pandemic and Russia-Ukraine war. The deadly monster of inflation has not only gobbled the developing economies but it has also not spared the developed world. The devastating consequences of rising energy and food prices have forced the central banks to raise the interest rates. Today, we eagerly waited for the monetary policy of England. Given the current inflation rate of England i.e., ~9.4% (much higher than the 2% target), it was assumed, for sure, that the country would witness an increase in its interbank rate. It was anticipated that the Bank of England would amplify the rate of interest by 25 to 50 bps.

The Pandora’s Box has been opened at 16:00 PM PST and the England has uplifted the interest rates by 50 bps, from 1.25% to 1.75, exposing England and GBP/USD to the curse of aggressive tightening monetary policy. This is the biggest hike the country has experienced since 1995. England faced the same fate as that of Australia; the pound depreciated more than 200 points within the first fifteen minutes of the inter-bank rate release. The household’s were already under tremendous pressure due to the passing of cost push inflation to the final consumers by the manufacturers; now, the Economy of England is wrapped with the fear of recession, which ultimately means mounting borrowing costs, contracting output, lowering living standards, and further weakening of currency in the near future.

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