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The Bank of England adds 50 basis points to the bank exchange rate on December 15; Peaking at 4.25% in the second quarter: Reuters poll by Reuters

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© Reuters. FILE PHOTO: People stand outside the Bank of England in the London Financial District in London, Britain, October 3, 2022. REUTERS/Henry Nicholls/File Photo

by Jonathan Capel

LONDON (Reuters) – The Bank of England will add another 50 basis points to its bank rate next week and cut borrowing costs to 3.50%, even though the economy has entered a recession as it battles inflation that has reached more than five times its target, according to Reuters. Survey found.

As in much of the world, inflation in Britain has been rife, spurred by rising energy costs in the wake of the Russian invasion of Ukraine which has also led to further disruption to supply chains still recovering from the coronavirus pandemic.

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Prices rose 11.1% in October compared to a year earlier, the largest increase in 41 years. This has added to consumers’ woes as they are also facing a record hit to living standards after the government introduced a tough budget to try to restore Britain’s financial reputation.

The country faces a winter of discontent as workers from railway clerks to teachers and nurses go on industrial strike to demand better wages.

Swati Dhingra, who is responsible for setting interest rates at the Bank of England, said in an interview published on Saturday that higher interest rates could lead to a deeper and longer recession, adding that there are few indications that demands for higher wages risk deteriorating wages and their prices.

The Bank of England was one of the first major central banks to start unwinding the ultra-loose policy adopted globally during the pandemic, and it went for a 75 basis point hike last month but was expected to add 50 basis points on December 15 according to all but two. 54 economists surveyed Dec. 5-7.

“Almost a year to the day the Bank of England started this tightening cycle, it looks like it’s going to deliver another rally at Christmas,” said HSBC’s Elizabeth Martins.

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“We think it would be a 50 basis point hike, taking the bank rate to 3.50%, with risks weighted towards a larger 75 basis point move, rather than a smaller 25 basis point move.”

Only two economists expect a 75 basis point increase next week compared to 13 of 56 in the November 23 poll.

A separate Reuters poll found that the US Federal Reserve is also expected to turn around a 50 basis point move this month after four consecutive increases of 75 basis points.

After next week’s move, the Bank of England will add another 50 basis points in the first quarter and 25 basis points in the second quarter, with averages showing that the bank rate peaked at 4.25% at that time. Projections for the final interest rate ranged from 3.50% to 4.75%.

In last month’s poll, the bank rate was expected to peak at 4.25% in the next quarter, and there was a big split among economists in the latest poll over when and where it would equalize.

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cold winter

Britain is almost certainly headed for recession, with economists giving an average chance of 85% of recession within a year.

Quarterly forecasts say the economy contracted by 0.2% last quarter and will do so by 0.4% this quarter, meeting the technical definition of a recession. Then it will contract by 0.4%, 0.4% and 0.2% in the first three quarters of next year.

The majority of respondents to another question said the recession would be long and shallow.

These forecasts haven’t changed much from last month, but when asked about risks to the GDP outlook, 12 of 18 said it was to the downside. During this year, the economy was expected to expand by 4.4% but then contract by 0.9% next year before returning to 0.9% growth in 2024.

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“2023 will be a difficult year for the economy as the effects of previous spikes in inflation and previous interest rate increases can be felt,” said Paul Dales of Capital Economics.

“The good news is that we believe the recession will end in the second half of 2023, and a gradual decline in inflation will likely allow the Bank of England to inject more strength into the recovery by cutting interest rates in 2024.”

Inflation was seen peaking at 10.9% this quarter, up from the 10.7% estimate last month, before drifting lower. However, it will not reach the bank’s target of 2.0% until the third quarter of 2024.

(For other stories from the Reuters World Economic Survey:)

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MicroStrategy is at its lowest level since 2020 after the sales were revealed

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(Bloomberg) — Shares of MicroStrategy touched their lowest level since August 2020 after the enterprise software company, which in recent years has been known as the largest buyer of bitcoin, revealed its first sale of the token.

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The stock fell 1.1 percent to $136.63 on Thursday, down 75 percent this year. Bitcoin rose less than 1% to around $16,590 and is believed to have fallen 64% since the start of the year.

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In a filing on Wednesday, MicroStrategy said it acquired approximately 2,395 Bitcoin between the beginning of November and December 21 through its subsidiary MacroStrategy, and paid out approximately $42.8 million in cash. It then sold 704 of the tokens on Dec. 22 for a total of about $11.8 million, citing tax purposes, before buying another 810 of them two days later.

Matt Malley, chief market strategist for Miller Tabak + Co. Step down as CEO. This news means they don’t seem to want to do that anytime soon.”

Overall, MicroStrategy held about 132,500 bitcoins worth over $4 billion USD as of December 27th. The company paid an average purchase price of $30,397 per bitcoin.

“Given MicroStrategy’s $2.4 billion in leverage, we believe the company may have a lot of leverage over Bitcoin, and may face some liquidity risk,” Jefferies analyst Brent Thiel wrote in a note on Wednesday. Thill has an “underperform” rating on the stock and a price target of $110.

Over the years of the pandemic, MicroStrategy has become well known for its Bitcoin takeovers, largely led by Saylor. Earlier this year, Saylor stepped down from that role and now serves as CEO at the company and continues to lead its bitcoin strategy.

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MicroStrategy was trading around $120 before Saylor first announced the company’s Bitcoin purchases in 2020. The stock reached an all-time high of $1,315 in February 2021.

(Updates to include the stock’s closing price in the second paragraph.)

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Bankman-Fried May File Petition in New York Federal Court Next Week Before Judge Louis Kaplan By Cointelegraph

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Former FTX CEO Sam Bankman-Fried is set to appear in court on the afternoon of January 3 to enter a lawsuit over two counts of wire fraud and six counts of conspiracy against him related to the collapse of cryptocurrency exchange FTX, according to Reuters. mentioned on December 28, citing court records. Bankman-Fried will appear before District Judge Lewis Kaplan in Manhattan.

Judge Kaplan was appointed to hear the case on December 27 after the original judge in the case, Ronnie Abrams, Resigned herself because of connections between FTX and the law firm Davis Polk & Wardwell, where her husband is a partner. The company provided advisory services to FTX in 2021.