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]]>The Bank of England (BoE) will make the much-anticipated rate decision today with several policy watchers leaning towards a cut. However, this remains dicey amid macro factors like service inflation among others. An interest rate could serve as an added boost for crypto and other risky assets.
The Bank of England is in the middle of a rate cut dilemma sprung by macro factors. Proponents for a cut await the first move in four years while stressing that if the BoE doesn’t act now, a September date will be more difficult. With inflation down to 2%, several market participants expect the decision today. However, a major clog in the wheel is the services inflation data which came in at 5.7%. This was hotter than expected coupled with rebounding growth in recent months.
According to Bloomberg, economists reckon a tight 5:4 split votes today as participants brace for the next policy direction. The Monetary Policy Committee members seem divided in views with hawkish Catherine Mann likely to be against a rate cut while Swati Dhingra might back the move.
Andrew Bailey, Governor of the Bank of England has previously hinted at a policy direction on the way to rate cuts but skepticism trails whether it would come in August or delayed till September. If rates are slashed, homeowners point to lower mortgage payments as well as rent. On the flip side, savers are getting more with the status quo.
Also Read: Altcoin Whales Prepare for Rally After September Fed Rate Cut
Bitcoin commentators look towards interest rate cuts to drive investment in the market. Higher interest rates will see investors move funds out of risky assets to reposition their portfolios. As the crypto market decides slight losses, stakeholders tip lowered interest rates to usher in the next market drive. This is coupled with the approval and inflow recorded by crypto ETFs. The United States Federal Reserve left interest rates unchanged as the Feds wait for more movements to 2% inflation.
Also Read: Ethereum ETF Outflows Top $77M After FOMC Meeting, What’s Next?
David Pokima
David is a finance news contributor with 4 years of experience in Blockchain Technology and Cryptocurrencies. He is interested in learning about emerging technologies and has an eye for breaking news. Staying updated with trends, David reported in several niches including regulation, partnerships, crypto assets, stocks, NFTs, etc. Away from the financial markets, David goes cycling and horse riding.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
The Bank of England (BoE) and the Financial Conduct Authority (FCA) have revealed plans for a Digital Securities Sandbox (DSS) to allow firms to use distributed ledger technology and other developments to issue shares and bonds.
In an April 3 official release, the Bank of England announced a consultation paper geared towards allowing financial firms to implement and operate a digital sandbox. According to the release, financial firms will be allowed to issue, trade, and settle securities through blockchain and developing technology. This comes on the back of increasing adoption from several traditional finance firms and driving use cases around blockchain technology.
“Firms that successfully apply for the DSS will be able to operate under a set of rules and regulations that has been modified to facilitate this. The DSS lasts for five years and will help regulators design a permanent technology-friendly regime for the securities market.”
Firms can leverage this to create new business models or simply combine previous activities for the desired efficiency. The Bank of England aims to facilitate innovation creating a safe and sustainable system, protecting stability and integrity in the financial market.
Per the release, the issuance of derivative contracts and crypto assets like Bitcoin are not under the scope of the DSS
“The intention of the Bank and the FCA is that financial market participants, such as companies that use capital markets to raise finance, or participants in financial markets who trade securities, should be able to interact with the firms inside the DSS as normal while benefitting from the new technology.”
To achieve the aims of the digital securities sandbox, the Bank of England seeks to engage stakeholders in finance to chip in points and promote fair representation. The bank has released a proposed template for the structure of the sandbox and a guide for applicants.
Players in the sector including financial market infrastructure firms or settlement services can engage in the consultation in a bid to make the regime successful. The deadline for responses to the consultation is May 29 creating an eight-week window for all stakeholders.
Read Also: Ark Invest’s Cathie Wood Labels Bitcoin (BTC) A “Flight To Safety” Asset
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
The market expects the UK’s apex bank to hold off on increasing or decreasing interest rates even as economic data is falling.
The Bank of England (BoE) is expected to hold UK interest rates on Thursday due to recorded price pressures and a decline in economic activity. At the moment, the market is pricing a 93% chance that the apex bank will not increase or reduce rates.
UK inflation came in at 6.7% in September, higher than analysts expected but unchanged from August’s figure. The BoE has increased interest rates 14 consecutive times since December 2021, moving the rate from 0.1% to 5.25%. The Monetary Policy Committee had previously voted 5-4 in support of a hold on rate hikes.
According to the S&P Global / CIPS Flash United Kingdom PMI released last week, recorded business activity fell for the third consecutive month in October. The release notes the eighth consecutive reduction in monthly manufacturing output, the longest decline since 2008/09. Chief Business Economist at S&P Global Market Intelligence, Chris Williamson, said:
“The UK economy continued to skirt with recession in October, as the increased cost of living, higher interest rates and falling exports were widely blamed on a third month of falling output.”
The release also showed a decline in both new work and backlogs and a reduction in private-sector employment for the second consecutive month.
Allianz Global Investors Head of Macro Unconstrained Mike Riddell noted that the UK economy has slowed, with declines in consumer spending and the housing market. Although he notes that wage growth has increased, Riddell is not optimistic that the growth is sustainable because other indicators point to weakness in the labor market. While he believes the BoE will hold rates, Riddell does not think the hike campaign has been highly detrimental.
“No doubt the BoE will signal that rates can still rise if economic data indicates a need, but as voting member Swati Dhingra recently highlighted, the long lags between changes in monetary policy and their impact on the economy mean that only up to a quarter of all the BoE hikes in this cycle have made a dent on the UK economy so far.”
The general respite in the BoE’s decision to suspend hiking interest rates may not last. According to Monetary Policy Committee (MPC) member Catherine Mann, there is no guarantee that the Bank will not resume its hikes because of the continuous increase in the UK’s cost of living. Riddell has said that the market may never see rates below 4% ever again.
Last November, UK inflation fell from a 41-year high of 11.1% to 10.7%. It remained in the double digits in March and dropped under 10% in April for the first time since August 2022. The Office for National Statistics (ONS) noted that it had fallen to 8.7% from 10.1% the previous month. By June, it fell further to 7.9%, and reduced to 6.8% in July.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
The UK Chancellor of the Exchequer Jeremy Hunt is optimistic that inflation would ease.
UK inflation came in for September at 6.7%, higher than expectations set by analysts. Also, inflation in the UK remained unchanged from August.
While inflation remained unaltered, the UK’s headline consumer price index (CPI) met expectations from economists polled by Reuters. The economists predicted a monthly increase of 0.5% and an annual 6.6%. For core CPI, the UK’s figure fell to 6.1% year-on-year (YoY), higher than the 6% expected but lower than the 6.2% in August. Core CPI excludes the prices of food, energy, alcohol, and tobacco.
The UK’s general CPI, which came down to 6.7%, was below expectations, which likely encouraged the Bank of England (BoE) to suspend hiking interest rates. The apex bank has increased interest rates 14 consecutive times since December 2021 to fight rising inflation. The rate moved from 0.1% at the time to the 5.25% in August.
The Office for National Statistics (ONS) stated that the prices of food and non-alcoholic drinks in the UK fell by 0.2% in September. This resulted from heavy competition among supermarkets, which eventually tanked the prices of items like eggs, cheese, milk, juices, soft drinks, and mineral water. However, although the prices are lower than in August, they are still more than 12% higher than recorded in the same period last year.
According to the ONS, an increase in diesel and petrol prices is a major reason for the pressure on the UK’s inflation. The price of diesel climbed at one of the fastest rates in the UK in 20 years. According to the RAC, a major automobile breakdown service provider, Diesel prices hit 163p a liter in September. Rising more than 8p, this is the fifth largest monthly rise since 2000. The price of petrol also climbed, rising by 4.5p to 152p a liter, the fourth consecutive monthly climb.
The rise in petrol and diesel prices comes as Saudi Arabia and Russia cut down on oil production to boost prices. This eventually pushed prices to about $100 (£82.89) per barrel. Combined with a fall in the value of the pound, prices increased at the pump. Nonetheless, the RAC believes that petrol is overpriced by nearly 7p a liter.
The UK Chancellor of the Exchequer Jeremy Hunt is optimistic that inflation would ease. In a recent statement, Hunt said:
“As we have seen across other G7 countries, inflation rarely falls in a straight line, but if we stick to our plan then we still expect it to keep falling this year. Today’s news just shows this is even more important so we can ease the pressure on families and businesses.”
Traders generally believe that the BoE will suspend further interest rate hikes. Also, reports suggest that the market has priced a 77% chance that the apex bank will leave rates unchanged at its November meeting. However, the BoE Governor Andrew Bailey recently warned that calling victory in the fight against inflation may be too soon.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
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The Bank of England has halted its 14 consecutive interest rate hikes, keeping rates at 5.25% due to moderating inflation. Despite this, the economy remains precarious.
The Bank of England has decided to end a streak of 14 consecutive interest rate hikes, keeping them at 5.25%, following data showing a moderation in inflation. According to CNBC, the Monetary Policy Committee voted 5-4 in favor of not raising rates at its September meeting, while 4 members indicated they would have preferred a 0.25-point increase to 5.5%.
The Bank of England’s decision comes one day after the US Federal Reserve announced it would not raise interest rates, despite not achieving the desired inflation percentage.
England has been one of the countries hardest hit by inflation, leading the Bank to implement significant interest rate hikes since December 2021 in an effort to control or at least slow down inflation, which had reached a 15-year-high.
However, new data shows that the country’s monetary policy has had a positive effect, as the annual increase in the general consumer price index (an indicator used to measure the evolution of prices of goods and services consumed by families and therefore gauge the country’s inflation) dropped to 6.7%, well below the projected 7%.
Although the latest inflation data suggests relief from rate hikes, Bank of England Governor Andrew Bailey cautioned that inflation remains above the target, and they do not rule out further increases if necessary. For now, they will maintain high rates while continuing to work on curbing inflation.
“Our previous increases in interest rates are working, but let me be clear that inflation is still not where it needs to be, and there is absolutely no room for complacency. We’ll be watching closely to see if further increases are needed, and we will need to keep interest rates high enough for long enough to ensure that we get the job done,” said he.
The Bank of England’s decision not to raise interest rates caused the British pound to fall, losing 0.7% against the dollar. However, this depreciation may be partly due to the strengthening of the dollar following the announcements by US Federal Reserve Chairman Jerome Powell that they would not raise interest rates in September.
Powell was clear in his presentation, indicating that despite the decrease in inflation, they have not yet achieved their goals, so they will maintain their aggressive stance throughout 2023, potentially making new rate increases before the end of the year.
Hussain Mehdi, a macro and investment strategist at HSBC Asset Management, has pointed out that despite the Bank of England’s decision not to raise rates and added that “the UK economy is already flirting with a recession.” The strategist has warned that there is a strong likelihood that major developed economies, including the United Kingdom, will enter a recession in 2024, given that current restrictive monetary conditions point to a slowdown.
Therefore, while the Bank of England’s pause in rate hikes is good news, the country’s economic situation remains fragile.
Marco is a passionate journalist with a deep addiction to cryptocurrencies and a keen interest in photography. He is fascinated by trading and market analysis. He has 5+ years of experience working with cryptocurrency projects.
Bitcoin expert Max Keiser has said that the Bank of England (BoE) will scramble to buy Bitcoin before the digital asset trades at $1 million.
His comments come after Bank of England’s deputy governor for financial stability, Jon Cunliffe, warned that cryptocurrencies could spark a global financial crisis unless tough regulations are introduced. Although regulators in many countries have started putting policies in place to manage the rapid growth of cryptocurrencies, Cunliffe said this must be pursued as a matter of urgency.
The deputy Bank of England governor has called for strict regulations on Bitcoin and other cryptocurrencies. According to the Guardian, Cunliffe has played a central role in monitoring cryptocurrencies over recent years as an adviser to the G20’s financial stability board and the central banks’ overarching advisory body, the Geneva-based Bank of International Settlements.
Related Reading | Bank Of England Seeks To Strengthen Cryptocurrency Regulations
In a speech on Wednesday, October 13, Cunliffe compared the growth rate of the crypto market, from $16 billion five years ago to $2.3 trillion today, to the $1.2 trillion subprime mortgage market before the 2008 financial crash. He said there was a probability that financial markets could be rocked in a few years by an event of similar magnitude.
“When something in the financial system is growing very fast and growing in largely unregulated space, financial stability authorities have to sit up and take notice,” he said.
He also spoke about the majority of crypto-assets having no intrinsic value and could be worthless overnight. He stated emphatically how the crypto world is beginning to connect to the traditional financial system even though the space is still largely unregulated.
The banking chief added that there were “Financial stability risks currently are relatively limited, but they could grow very rapidly if, as I expect, this area continues to develop and expand at pace. How large those risks could grow will depend in no small part on the nature and on the speed of the response by regulatory and supervisory authorities.”
Related Reading | Bank of England Governor Still Isn’t a Fan of Bitcoin
His comments are similar to those of Bank of England Governor Andrew Bailey. In May, Bailey called crypto dangerous and warned that investors should be prepared to lose all their money due to the digital assets’ lack of intrinsic value.
Bitcoin expert Max Keiser responded to the Bank of England’s deputy governor’s recent warning about cryptocurrencies in a statement to Express.co.uk.
He said, “Bitcoin is designed to trigger a meltdown of the current fiat money banking system. This is a mathematically guaranteed outcome.”
BTC trading at over $60.8K | Source: BTCUSD on TradingView.com
Keiser implies that the BoE is grieving because Bitcoin killed central banks. “Bitcoin killed central banks. The Bank of England is in the second stage of the five stages of grief, the anger phase.”
He further pronounces that the Bank of England will eventually consider adopting Bitcoin.
“The bargaining phase will be their central bank digital currency stage and when that fails comes depression as the price tops £363,000 ($500,000) and then acceptance with the Bank of England scrambling to buy Bitcoin before it tops £727,000 ($1million) per coin,” Keiser says.
Featured image by Proactive investors, Chart from TradingView.com
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