Bank of England Warns of Recession As British Pound Plummets

Bank of England, Warns of Recession, as British Pound Plummets.

On May 5, the British pound was preparing for its biggest drop since the beginning of the COVID-19 pandemic.

NBC reports that the Bank of England warned that Britain's economy could see a sharp growth slowdown.

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NBC reports that the Bank of England warned that Britain's economy could see a sharp growth slowdown.

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Early on May 5, sterling hit a low of 1.2393 against the dollar, reaching its lowest level since July 1, 2020.

Policymakers at the Bank of England voted in favor of passing the fourth consecutive rate hike since December.

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The same policymakers reportedly warned that GDP growth will slow sharply and inflation is expected to peak at 10%.

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We are witnessing a clear depreciation of sterling during 2022 which is placing it as the third-worst performing major currency, Jesús Cabra Guisasola, senior associate for global capital markets at Validus Risk Management, via NBC.

The Monetary Policy Committee voted 6-3 to approve a 25-basis point increase which took the base interest rate up to 1%.

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According to members of the committee, the dissenting votes preferred a 0.5 interest rate hike to bring the base interest rate up to 1.25%.

NBC points out that central banks around the world are struggling to steer the economy through an inflation surge worsened by Russia's invasion of Ukraine.

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NBC points out that central banks around the world are struggling to steer the economy through an inflation surge worsened by Russia's invasion of Ukraine.

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We are walking this very narrow path now.

The proximate reason for raising bank rate at this point is, it’s not only the current profile of inflation, what is to come and of course what that could mean for inflation expectations to come, but the risks as well, Andrew Bailey, Bank of England Governor, via NBC.

We are walking this very narrow path now.

The proximate reason for raising bank rate at this point is, it’s not only the current profile of inflation, what is to come and of course what that could mean for inflation expectations to come, but the risks as well, Andrew Bailey, Bank of England Governor, via NBC