Interest rates 2022 – live: Bank of England to reveal highest level in 13 years

Global shares were mostly lower Thursday after the Federal Reserve raised its key interest rate by three-quarters of a point and signaled more rate hikes were coming to fight inflation.

European benchmarks and US futures slipped after Tokyo and some other markets tracked Wall Street’s gains of the day before.

Shares in New York rallied after the Fed’s hike, the biggest since 1994, as investors initially took heart from Chair Jerome Powell’s comments suggesting future rate increases may be more modest.

But analysts warned the gains might be short-lived given the extent that high inflation has seeped into the world economy.

The Bank of England is under pressure to raise interest rates more aggressively amid concern that the quarter-percentage-point hike expected Thursday will do little to combat price increases that have pushed inflation to a 40-year high.

“It is quickly becoming apparent that more radical action is needed for the Bank of England to establish some sense of stability, because tinkering around the edges simply isn’t cutting it,” Michael Hewson, chief market analyst at CMC Markets UK, said in a note to clients.

The war in Ukraine has boosted food and energy prices as the fighting disrupts shipments of oil, natural gas, grain and cooking oil. That is adding to price increases that began last year as the global economy started to recover from the Covid-19 pandemic.

The Bank of England last month forecast that inflation would accelerate to more than 10 per cent later this year after reaching 9 per cent in April, already the highest since 1982. The bank’s inflation target is 2 per cent.

Bank of England policymakers have been cautious about raising interest rates too quickly, arguing that many of the inflationary pressures facing the British economy are external and beyond the bank’s control.

But price increases are now becoming embedded in the economy, fueling demands for higher wages and slowing economic growth as consumers and businesses curtail purchases.

Online fashion giant Boohoo has revealed a slump in sales over the past quarter as it failed to keep up with lockdown-boosted trading.

Revenues fell by 8 per cent to £445.7 million over the three months to 31 May, compared with the same period last year.

The retailer said UK sales nudged 1 per cent lower but it was particularly impacted by heavier declines elsewhere in Europe and in the US.

Nevertheless, Boohoo said it was optimistic as its UK sales improved month on month over the quarter and returned to net sales growth in May.

The Swiss National Bank raised its policy interest rate for the first time in 15 years, up from -0.75 per cent to -0.25 per cent.

This 50-basis-point rise makes the SNB the latest central bank to lift interest rates to fight inflation. This is the first interest rate rise by the SNB since Septenber 2007; it had kept borrowing costs at -0.75 per cent since 2015.

Thomas Jordan, chair of the SNB’s governing council, said the bank decided to tighten monetary policy to counter increased inflationary pressure.

Mr Jordan said: “The tighter monetary policy is aimed at preventing inflation from spreading more broadly to goods and services in Switzerland.

“It cannot be ruled out that further increases in the SNB policy rate will be necessary in the foreseeable future to stabilise inflation in the range consistent with price stability over the medium term.

To ensure appropriate monetary conditions, we are also willing to be active in the foreign exchange market as necessary.”

The Bank of England is expected to hike interest rates for the fifth time in a row, but experts warn that any hesitation could help push the price of petrol higher for squeezed British drivers.

“The Bank of England faces a stern test of its mettle at the next interest rate decision, and any hesitation is likely to result in the pound being punished on the currency markets,” said Laith Khalaf, head of investment analysis, AJ Bell.

Such a drop would mean that the price of petrol and diesel, and other imports that the UK pays for in dollars, would rise.

This month the average price of filing a family car topped £100 for the first time.

Any further jump is unlikely to be welcomed by drivers.

Bank of England governor Andrew Bailey had warned before May’s announcement that the BoE must walk a “very tight line” between cooling inflation and triggering a recession.

Consumer confidence fell last month and retail sales came in lower than expected, due to the impact of soaring energy bills, food prices and fuel costs.

Below is a quick easy guide to how the latest interest rate change will affect you:

The Federal Reserve on Wednesday intensified its drive to tame high inflation by raising its key interest rate by three-quarters of a point — its largest hike in nearly three decades — and signaling more large rate increases to come that would raise the risk of another recession.

The move the Fed announced after its latest policy meeting will increase its benchmark short-term rate, which affects many consumer and business loans, to a range of 1.5 per cent to 1.75 per cent.

The central bank is ramping up its drive to tighten credit and slow growth with inflation having reached a four-decade high of 8.6 per cent, spreading to more areas of the economy and showing no sign of slowing. Americans are also starting to expect high inflation to last longer than they had before. This sentiment could embed an inflationary psychology in the economy that would make it harder to bring inflation back to the Fed’s 2 per cent target.

The Bank of England is expected to hike interest rates again on Thursday as it struggles to temper rising inflation and poor economic growth.

The Bank’s monetary policy committee is expected to hike the base rate of interest for the fifth time in a row – to a rate of 1.25 per cent. At its May meeting, the Bank increased the base rate to 1 per cent, its highest point in 13 years.

If they do go ahead with another raise on Thursday it would be the first time since January 2009 that the rate was higher than 1 per cent.

Read the full story from our reporter, Holly Bancroft:

Good morning and welcome to The Independent’s interest rates live blog.

The Bank of England is poised to hike interest rates to 1.25 per cent – the highest level in 13 years. Follow our live blog for the latest updates, and news leading up to and following the announcement.