- The British pound tumbled after the Bank of England hiked rates and warned the UK would see a recession for all of 2023 and the first half of 2024.
- Sterling fell about 2% against the US dollar to $1.11 on Thursday, hitting the lowest levels since October 21.
The British pound tumbled on Thursday after the Bank of England issued a super-sized rate hike and warned that the UK would see a recession for all of next year and the first half of 2024.
Sterling fell about 2% against the US dollar to $1.11 on Thursday, hitting the lowest levels since October 21, when $4 as prime minister after introducing a plan for unfunded tax cuts, which initially caused the pound to plunge to a$4.
The Bank of England raised rates by 75 basis points, its largest single hike since 1989, as the central bank scrambles to get a lid on inflation. The policy rate is now at 3%, the highest it's been since the 2008 crisis.
"Inflation is too high, and it's the bank's job to bring it down," BOE Governor Andrew Bailey said in a press hearing on Thursday. "If we do not act forcefully now it will be worse later on."
The bank predicted UK inflation will hit 11% by year-end, and will stay above 10% over "the near term." That will be met by a 0.75% fall in GDP over the second half of this year, with expectations for GDP to keep declining through 2023 and through the first half of 2024, officials said in a $4.
The UK has been slammed this year by $4 due to Russia's war with Ukraine, which threatens to plunge $4.
Though the Bank of England noted that headline inflation could start to ease as soon as early next year, analysts warned more hikes were still ahead.
"We don't see this as the end of the tightening cycle. After all, the labour market remains extremely tight, inflation is still far too high and the risk of expectations dis-anchoring elevated," BNP Paribas analysts said in a note on Thursday.
BNP estimates three more 50-basis-point hikes from the Bank of England, bringing the policy rate to 4.5% next year.