LGT Navigator

BoE raises rates, signals more hikes to come

The Bank of England (BoE) increased its key interest rate on Thursday and signalled more hikes are likely to come, as long as inflation remains strong. Equity markets mostly fell Thursday, with London’s FTSE100 dropping immediately after the BoE announcement, but paring losses later in the session to end the day down 0.14%.

Shane Strowmatt, LGT
Temps de lecture
5 minutes
Pound Sterling
© Shutterstock

The Bank of England raised its benchmark lending rate to 4.5%, the highest level since 2008. The central bank revised its economic forecasts and no longer expects the British economy to fall into recession. It now expects inflation to decline to 5.1% by the end of the year, down from the more than 10% in March. However, with this the BoE still has the highest inflation expectation for this year among major economies.

Elsewhere in Europe, the European Central Bank (ECB) said consumers’ expectations for eurozone inflation increased, according to a survey conducted by the central bank. In March, consumers expected prices to increase by 5% over the next 12 months, up from 4% in February. Last week, the ECB raised rates by 25 basis points, slower than its previous moves of 50 basis points, but multiple officials have already warned that rate higher rates will likely still be needed to rein in inflation, which is around 7% in the euro area.

In New York, tech stocks were once again the winners on equity markets. The tech-heavy Nasdaq-100 gained 0.31% to finish the day at 13,389.78 points. Macro data pressured markets the broader indices. Initial jobless claims in the US increased by 22,000 to 264,000 last week, the highest number since October 2021. The Producer Price Index continued to decelerate in April to 2.3%, which could be interpreted as a sign that the US Federal Reserve may be able to soon end its rate-hiking cycle. The Dow Jones Industrial lost 0.66% to end the day at 33,309.51 points and the S&P 500 fell 0.17% to close at 4,130.62 points.

The negative sentiment from the US spilled over to Asian markets on Friday with nearly all markets logging losses. In mainland China, the Shanghai Composite lost 0.7%, and the Shenzhen Component was down 0.4%. Hong Kong’s Hang Seng Index lost 0.3%. South Korea’s Kospi dropped 0.5%. Japan’s Nikkei defied the general trend on Thursday, gaining 0.9%.

Corporate news in focus: Quarterly earnings from Allianz and annual data from Richemont.

Economic data in focus: UK Q1 GDP (08:00 CET), France and Spain deliver consumer prices for April (09:00), US import and export prices (14:30), US University of Michigan Consumer Sentiment (16:00).

LGT helps you make informed investment decisions

All about global economic and market trends at a glance

You can also follow us on Facebook or LinkedIn – or visit Insights and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

Prendre contact