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Will The Bank Of England Continue Raising Interest Rates To Combat Surging Inflation?
September 12,2022 14:39:56With the UK recording the highest inflation rate since February 1982 in July 2022, the Bank of England is set to announce its interest rate decision on Thursday, September 15.
What steps has the BoE taken so far to combat inflation?
The UK central bank increased its main rate by 50bps to 1.75% during its August meeting, the sixth rate hike in a row. It also raised borrowing costs to the highest level since 2009. The latest rate increase was also the biggest since 1995.
According to the latest projections by the BoE, CPI inflation might increase to 13.3% in October, and remain at high levels throughout 2023 too. The British economy is expected to enter recession during the fourth quarter of 2022, which might last for five quarters.
So, what can we expect from UK’s central bank now?
Inflation has been continuously surging, hitting new records over the past months. The annual inflation rate accelerated to 10.1% in July from 9.4% in June, recording the highest reading since February 1982. In a bid to fight this rising inflation, the BoE is expected to raise interest rates by another 50 bps at its upcoming meeting.
However, some economic reports, due to be released this week, might impact the bank’s decision. The GDP report is scheduled for release on September 12, with analysts expecting the economy to have contracted 0.1% month-over-month in July, compared to the 0.6% contraction a month ago. Employment data will be released on September 13, while the all-important inflation report will be released on September 14.
GBP/USD prospects
The Bank of England’s rate decision will significantly impact the GBP/USD forex pair. Any further increase in interest rates could provide support to the British currency, which has been under pressure against the strengthening US dollar.
Get ready for an eventful week inthe UK, which is expected to provide exciting trading opportunities.
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