Nov 03, 2022
VOT Research Desk
A Federal Reserve mirror image, which also explains the drop in the GBP/USD exchange rate .
The Bank of England has chosen the opposite path from the US Fed, which is prepared to moderate the rate hike pace but anticipates a higher peak. The Old Lady chose to increase interest rates by 75 basis points, which is the most since 1992, but she also stated that the peak rate will be lower than anticipated.
These are merely the headlines, though. BoE Governor Andrew Bailey and his associates constructed a gloomy picture from the inside out. Instead of the five quarters they had predicted in August, they now envisage a recession lasting two full years. Inflation is now peaking at 11% as opposed to the previously reported 13%.
Even while the economy is benefiting from the mild weather, the pound is still suffering.
The pound should keep declining, especially when compared to the US currency and the aggressive Fed. However, if you believe the BoE, there is opportunity for declines versus the euro as well.
According to the Monetary Policy Report, the British economy is expected to do worse than both the American and continental economies during the next two years (MPR).
Overall, the economic crisis has just started while the political one is resolved. The pound is declining as Britain already faces a recession.
