Pound slides as rates of interest ‘near peak’: Sterling slips by greater than a cent against the US dollar
The pound fell and the FTSE 100 flirted with record highs yesterday because the Bank of England hiked rates of interest but signalled that they were now at or near their peak.
Sterling slipped by greater than a cent against the US dollar to above $1.22 as rate-setters dropped recent language about acting ‘forcefully’ to bring down inflation.
The FTSE 100 was buoyed by the heavy hint that Bank rate may not have much further to rise, ending the session at just over 7820 points, only 57 in need of its all-time closing high.
It joined a rally of world stock markets, which have been cheered by hopes that a painful series of hikes in Britain, the US and Europe could also be drawing to a detailed.
In America, the US Federal Reserve increased rates of interest by 1 / 4 of a percentage point – a slowdown from previous half-point and three-quarter point rises.
Pound hit: Sterling slipped by greater than a cent against the US dollar as the Bank of England hiked rates of interest but signalled that they were now at or near their peak
Federal Reserve chairman Jerome Powell said more hikes can be needed to ensure inflation was being tamed but markets seized on his remark that ‘the disinflationary process has began’.
That gave a lift to Wall Street and particularly its giant tech stocks – bombed-out last 12 months as rates rose – as traders bet on the Fed becoming less aggressive by way of rate of interest hikes.
The tech-heavy Nasdaq shot 2 per cent higher on Wednesday within the wake of Powell’s comments and shot an extra 3 per cent higher yesterday.
In London, Bank of England Governor Andrew Bailey said Britain now appeared to have ‘turned the corner’ on inflation, which has slipped back after hitting 11.1 per cent last October, and the Bank now thinks it’s past its peak.
Bailey made clear that the watering down of the Bank’s language about further rate hikes was significant.
He said: ‘We will take each game because it comes and take a look at the evidence very closely as we do and see what we conclude from that.’
Meanwhile the European Central Bank (ECB) hiked rates by half a percentage point yesterday and signalled at the very least another rise of the identical magnitude next month.
Its president, Christine Lagarde, said the risks posed by inflation were becoming ‘more balanced’ but insisted ‘we should not done’ with increases.
But Carsten Brzeski, head of macro at ING Bank, said the ECB was ‘opening the door to either a pause or a slower rate hike pace beyond March’.
Germany’s Dax stock index rose by greater than 2 per cent and France’s Cac 40 climbed greater than 1 per cent.
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