Pound plunges as Bank hikes interest rates

Nov 05, 2017, 01:52
Pound plunges as Bank hikes interest rates

Sterling fell 0.1 percent to $1.3040 on Friday, its lowest since October 6, extending losses from the previous session when the BoE decision sent the pound plummeting nearly 2 US cents in just three minutes.

Bank of England policymakers voted by a majority of 7-2 to raise rates by 25 basis points from a record-low 0.25 per cent after a regular gathering, mirroring policy tightening seen in the United States and eurozone.

The central bank said it expected Thursday's rate hike, the first in over a decade, would be followed by just two more quarter-point increases over the next three years. The decision is controversial because the only reason to raise interest rates is to prevent the economy from "overheating", slowing down consumption.

A number of banks and building societies have already announced they will be increasing their rates in line with the rise announced by the Bank of England today. Sterling dropped more than a cent against the two currencies to $1.3130 and €1.1280 respectively. 'Today's quarter point rate hike shouldn't raise eyebrows, and looks for now to be a one-off muscle flex by the Bank of England, rather than the start of an aggressive tightening, ' he said.

The Bank said in a statement: "The decision to leave the European Union is having a noticeable impact on the economic outlook".

In its latest housing market forecast Savills also predicts that the Bank of England base rate will reach 2.5% over the period and average mortgage rates reach 4% over the next five years. "And Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures".

That was in the days shortly before the financial crisis which, when it hit, saw interest rates cut and cut in efforts to get the economy growing again.

Business bodies said the rise was expected, but warned that companies could be hit if further increase came too soon.

But some economists have voiced fears over the timing of a rate hike, amid uncertainty caused by Brexit negotiations and a shaky consumer outlook as household finances are squeezed by rising inflation and paltry wage growth.

That weaker pound has driven up the costs of imported food, fuel and other goods.

Also, although it is well above the Government's 2% target, the current inflation rate of 3% is still well short of two previous spikes seen since the financial crisis of 2008.

Last month's services purchasing managers' index (PMI) produced a better-than-expected result, showing the sector picking up to 53.6 in September, easily above the 50 level that separates growth from contraction.

YOU MIGHT ALSO LIKE
  • Qualcomm up after rumor of Broadcom interest

    Qualcomm up after rumor of Broadcom interest

    Qualcomm may soon be extended a way out courtesy of Broadcom , which itself supplies Apple with Wi-Fi and Bluetooth combo chips. Based on 2016 revenue, the enlarged company would be the world's third-largest chipmaker behind Intel and Samsung Electronics.
    NYPD gathering evidence to arrest Harvey Weinstein

    NYPD gathering evidence to arrest Harvey Weinstein

    She has publicly accused Weinstein of raping her twice in her apartment in 2010 and called police about it on October 26. She described the alleged encounter: "He pushed me onto the bed and his trousers were down and he lifted up my skirt".
    NAB to slash jobs, increase digital focus

    NAB to slash jobs, increase digital focus

    Heavyweight Rio Tinto Ltd closed at an over six-year high, while its rival, BHP Billiton Ltd closed at a 7-week high. As transactions move to digital channels - and this is driven by our customers - we will need fewer people.
  • Mobile and Sprint merger could be back on the table

    Mobile and Sprint merger could be back on the table

    It is still possible that Sprint will reject the new terms or decline investing any more effort into the potential merger. The two sides could reach a deal within weeks, but the two companies could still fail to agree on deal terms.
    Two-team AFC South race after Deshaun Watson's injury? Not so fast

    Two-team AFC South race after Deshaun Watson's injury? Not so fast

    A few minutes later, ESPN's Adam Schefter tweeted that on-site tests on Watson's knee affirm that he did tear his ACL. Watson finished the game going 12 for 23 in pass attempts for 102 yards with one touchdown and one interception.
    United States  unemployment rate falls to 4.1 per cent, lowest in 17 years

    United States unemployment rate falls to 4.1 per cent, lowest in 17 years

    Nonbank mortgage employment declined in September, the largest drop since January, according to the Bureau of Labor Statistics. That was the largest gain since July a year ago , but was below economists' expectations for an increase of 310,000 jobs.
  • U.S.  carries out first airstrikes against ISIS in Somalia

    U.S. carries out first airstrikes against ISIS in Somalia

    Photo President Trump said on Twitter that his administration had attacked the Islamic State "much harder" over the past two days. These are the first American military strikes against ISIS, which has developed a small presence in the Horn of Africa.
    Owners Deposed In Kaepernick Collusion Case

    Owners Deposed In Kaepernick Collusion Case

    Roger Goodell, the NFL's commissioner, denied those claims and stated that teams were just making " football decisions ". San Jose Sharks player Joel Ward has even gone public with his debate to kneel during the anthem during preseason.
    'StarCraft II' Will Soon Be Available to Play for Free

    'StarCraft II' Will Soon Be Available to Play for Free

    Iconic PC real-time strategy game, StarCraft II: Wings of Liberty , is going free-to-play seven years after its release . This free-to-play change will likely be the most significant step in preserving StarCraft 2's relevance yet.
  • US Senator Rand Paul assaulted at his home in Kentucky

    US Senator Rand Paul assaulted at his home in Kentucky

    Paul endured minor wounds in the assault, points of interest of which are as yet obscure. In a statement, Paul spokeswoman Kelsey Cooper said the Republican senator is 'fine '.
    Saudi-led coalition denies targeting a market in Yemen

    Saudi-led coalition denies targeting a market in Yemen

    Saudi air defence forces were quoted by broadcaster Al-Arabiya as saying they intercepted the missile north-east of the capital. According to videos published on social media, smoke could be seen rising near Riyadh's King Khalid International Airport.
    'La Bamba' Star Lou Diamond Phillips Arrested for DWI

    'La Bamba' Star Lou Diamond Phillips Arrested for DWI

    Despite the attest, the La Bamba actor doesn't plan on cancelling a speaking engagement in Corpus Christi later in the day. The event will still go on as planned said Jay Ellington, director of the Corpus Christi Parks and Recreation Department.
popular