# Bank of England raises rates in 8-1 vote
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-03-17
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Bank of England raises interest rates amidst soaring
Meta Description: Stay informed on the Bank of England's decision to raise interest rates to 0.75% and its impact on the economy and market response.
URL: https://financedigest.com/bank-of-england-raises-rates-in-8-1-votehtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-03-17t152821z2lynxnpei2g0pfrtroptp4britain-boe-1736815955983-compressed.jpg)

LONDON (Reuters) – The Bank of England raised interest rates on Thursday in a bid to keep fast-rising inflation in check but, with the economy facing a huge hit from soaring energy prices, it softened its language on the need for further increases.

Eight out of nine members of the Monetary Policy Committee (MPC) voted to raise Bank Rate to 0.75% from 0.5%, following the U.S. Federal Reserve’s [decision on Wednesday to raise borrowing costs for the first time](https://www.financedigest.com/georgias-tbc-bank-slashes-loan-decision-time-with-fico-solution.html "Georgia’s TBC Bank Slashes Loan Decision Time with FICO Solution") since the COVID-19 pandemic.

Deputy Governor Jon Cunliffe voted to keep rates on hold, [warning of a big hit to demand from higher](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") commodity prices. Economists polled by Reuters had expected a unanimous vote for [higher rates](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate").

STORY:

MARKET REACTION:

STOCKS: The main benchmark [stock index ticked higher as the pound](https://www.financedigest.com/the-pound-gilts-and-stocks-likely-winners-and-losers-from-uk-budget.html "The pound, gilts and stocks: likely winners and losers from UK budget") weakened.

FOREX: The pound was last down 0.3% at $1.3096, the day’s low, after trading as high as $1.3211 before the [BoE decision](https://www.financedigest.com/sterling-hits-five-month-high-against-euro-before-boe-decision.html "Sterling hits five-month high against euro before BoE decision"). Against the euro, the [British currency](https://www.financedigest.com/bitcoin-sterling-volumes-spike-to-record-high-as-british-currency-flounders.html "Bitcoin-sterling volumes spike to record high as British currency flounders") weakened 0.4% to 84.36 pence versus 83.68 pence before the vote.

MONEY MARKETS: Bond markets trimmed their expectations on the amount of rate hikes for the rest of the year with the [Bank of England’s](https://www.financedigest.com/bank-of-england-fines-former-tsb-executive-over-2018-it-failure.html "Bank of England fines former TSB executive over 2018 IT failure") next meeting in May no longer signaling a full rate hike.

COMMENTS:

GUY FOSTER, CHIEF STRATEGIST AT BREWIN DOLPHIN, LONDON:

With [inflation so high it would be tempting for the MPC to really](https://www.financedigest.com/be-really-really-careful-on-inflation-bank-of-englands-haskel.html "Be ‘really, really careful’ on inflation – Bank of England’s Haskel") assert themselves with a sharper rate increase but since the invasion of Ukraine a more cautious approach has won out.

It’s a risky game with high wage inflation, a tight [labour market](https://www.financedigest.com/spains-labour-market-resilient-as-unemployment-drops-in-nov.html "Spain’s labour market resilient as unemployment drops in Nov") and inflation expectations very elevated too. More [interest rate](https://www.financedigest.com/ecbs-centeno-says-interest-rate-close-to-peaking-if-no-new-shocks.html "ECB’s Centeno says interest rate close to peaking if no new shocks") increases seem necessary and a brisker pace now could make the eventual adjustment easier.

MARC OSTWALD, CHIEF ECONOMIST, ADM [INVESTOR SERVICES](https://www.financedigest.com/credit-agricole-and-caceis-to-buy-rbc-investor-services-europe-unit.html "Credit Agricole and CACEIS to buy RBC Investor Services’ Europe unit") INTERNATIONAL:

It’s debatable whether the next 25 bps [rate hike](https://www.financedigest.com/instant-view-ecb-sticks-with-big-rate-hike-even-as-bank-fears-roil-markets.html "Instant View: ECB sticks with big rate hike even as bank fears roil markets") will be May or June, and (the BOE) is likely to pause thereafter. It may indeed be the case that they could signal a pause in May, given that the [Bank’s Agents](https://www.financedigest.com/the-rise-of-virtual-agents-the-future-banking-experience.html "The rise of virtual agents: the future banking experience") will be put on high alert to monitor reaction to April’s household energy price hikes, National Insurance and Council Tax hikes.

ED HUTCHINGS, HEAD OF RATES AT [AVIVA INVESTORS](https://www.financedigest.com/aviva-boosts-investor-payouts-after-profit-beat.html "Aviva boosts investor payouts after profit beat"), LONDON:

“In contrast to both the U.S. Federal Reserve and the European Central Bank, the [Bank of England](https://www.financedigest.com/bank-of-england-still-needs-to-see-the-job-through-on-inflation-pill.html "Bank of England still needs to ‘see the job through’ on inflation: Pill") delivered a relatively dovish message to investors today. Going into the meeting, the market was already pricing in more than six 0.25% hikes by the end of 2022, thereby taking the [Central Bank rate](https://www.financedigest.com/central-banks-keep-hiking-rates-amid-banking-turmoil.html "Central banks keep hiking rates amid banking turmoil") to around 2% with the potential for more.

However, with the vote being 8-1, and the lone voter being for no change, there was more of a focus on slower [growth and its impact](https://www.financedigest.com/how-technology-consultants-impact-business-growth.html "How Technology Consultants Impact Business Growth") on households going forward. Gilt yields should now be more supported, thus reducing further concerns around sizeable moves [higher in yield](https://www.financedigest.com/wall-st-indexes-mixed-treasury-yields-tick-up-as-higher-rates-loom.html "Wall St indexes mixed, Treasury yields tick up as higher rates loom") in the near term.

DEAN TURNER, ECONOMIST AT UBS GLOBAL [WEALTH MANAGEMENT:](https://www.financedigest.com/analysis-credit-suisse-collapse-threatens-switzerlands-wealth-management-crown.html "Analysis-Credit Suisse collapse threatens Switzerland’s wealth management crown")

The minutes highlight the ongoing inflationary pressures [facing the UK economy](https://www.financedigest.com/euro-zone-economy-faces-growing-risk-of-recession-survey-shows.html "Euro zone economy faces growing risk of recession, survey shows") and the tight labour market. Given this backdrop, we expect the [Bank to hike rates again at its next meeting](https://www.financedigest.com/banking-stability-worries-go-behind-closed-doors-at-imf-world-bank-meetings.html "Banking stability worries go behind closed doors at IMF-World Bank meetings") in May, taking base rates to the 1% mark.

In our view, with the [Bank of England likely to deliver further hikes](https://www.financedigest.com/big-ecb-hike-adds-fuel-to-the-banking-sector-fire.html "Big ECB hike adds fuel to the banking sector fire") in the coming months, we expect sterling to recover as the year progresses and still look for the pound to finish the year higher than where it currently sits.”

STUART COLE, [HEAD MACRO ECONOMIST](https://www.financedigest.com/germany-heading-for-recession-despite-new-relief-plan-economists.html "Germany heading for recession despite new relief plan – economists"), EQUITI CAPITAL, LONDON:

Clearly the deteriorating [growth outlook](https://www.financedigest.com/euro-zone-credit-growth-remains-brisk-despite-gloomy-outlook.html "Euro zone credit growth remains brisk despite gloomy outlook") is becoming more of a concern to the MPC, and the easing off on the monetary tightening accelerator evidences this.

Alongside this, the MPC may also be recognising that [current inflationary pressures are largely](https://www.financedigest.com/euro-zone-current-account-deficit-widens-again-on-large-energy-bill.html "Euro zone current account deficit widens again on large energy bill") supply-side driven and as such there is little the MPC can do to fight them, and concluded that the deflationary impact of the fiscal tightening facing the UK from this April will be enough to counter the inflationary boosting potential of higher wages claims.

IPEK OZKARDESKAYA, SENIOR STRATEGIST AT SWISSQUOTE, SWITZERLAND:

Obviously with the fact that we have a conflict in Ukraine going on and its impact on global growth, maybe the move is a little bit more dovish, but I don’t believe that the expectations have changed for the [Bank of England](https://www.financedigest.com/bank-of-england-officials-split-over-future-path-for-rates.html "Bank of England officials split over future path for rates").

SAM COOPER, VICE-PRESIDENT OF MARKET RISK SOLUTIONS AT [SILICON VALLEY BANK](https://www.financedigest.com/exclusive-u-s-regulator-seeks-sale-of-silicon-valley-bank-signature-bank-portfolios-sources.html "Exclusive-U.S. regulator seeks sale of Silicon Valley Bank, Signature Bank portfolios-sources"), LONDON:

No surprise in the decision from the BoE to hike today, however the dissent from Cunliffe provides a dovish tilt and has prompted traders to revise bets on the pace of [future rate hikes](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike"), immediately weighing on sterling strength.

[(Reporting by the London Markets](https://www.financedigest.com/cable-cars-and-ropeways-market-report-size-growth-demand-scope-opportunities-and-forecast-2016-2026-fmi.html "Cable Cars and Ropeways Market Report | Size, Growth, Demand, Scope, Opportunities and Forecast 2016-2026: FMI") Team; Compiled by Saikat Chatterjee; Editing by Catherine Evans)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---