The Bank of England has raised interest rates for the third time in a row, but the British pound is falling on fears of tighter monetary policy in the future.
The Bank of England (BOE) raised its main bank rate by 25 basis points to 0.75 percent, a pre-pandemic level, for the third time in a row as it confronts rising inflation.
The Monetary Policy Committee (MPC) of the Bank of England voted 8-1 to keep rates unchanged, with Deputy Governor Jon Cunliffe voting to do so because he anticipates dramatically higher commodity prices to dampen consumer demand. The vote to boost rates last month had a narrower majority of 5-4.
Policymakers now expect inflation to reach 8% in the second quarter, up from 7.25 percent previously predicted.
The policy statement, on the other hand, was dovish, implying that expectations for the central bank to raise its bank rate to 2% by the end of the year had gotten ahead of themselves. “In the coming months, some additional mild tightening may be justified,” the MPC wrote, “although there were risks on both sides of that judgement depending on how medium-term prospects evolved.” The British pound fell by around 1% against the dollar and the euro as a result of this.
Bitcoin (BTC) continues to fluctuate marginally on both sides of $41,000, indicating that crypto markets are unaffected.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.