According to Reuters, the British pound (GBP)—which fell on Friday—was on track to post its highest weekly gain since October after the Bank of England (BoE) became the first G7 economy to increase its lending rates.
The GBP/USD fell by 0.64% on Friday, although not far away from the $1.3376 three-week high hit following the BoE’s prime interest rate decision on Thursday.
The BoE’s decision came as a shock to spectators—after it raised its rates by 15 base points to 0.25%—which sent Bank stocks and the pound.
As mentioned earlier, Britain became the first G7 nation to increase rates since the start of the pandemic in 2020. That said, the US Federal Reserve has also indicated that it would tighten its economic policy in 2022. The European Central Bank (ECB) only reined slightly in the stimulus.
BoE Speeds Up Rate Increase Timetable—to Raise Rates Three Times in 2022
Meanwhile, better-than-expected UK retail sales data for November alongside blistering inflation rate fueled analysts’ speculations that the BoE could raise rates again in February. HSBC strategists recently noted that:
“This latest data – strong retail sales and resilient consumer confidence – suggests that the demand side of the UK economy remains robust, even with higher inflation.”
The apex bank sped up its rate increase timetable for 2022, proposing as many as three rate hikes, compared to only two in 2021.
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