The Bank of England raised its key refinancing rate by 25 basis points to 1%. This is the fourth straight increase and it now sits at its highest level since 2003, just as UK economy shows clear signs that it’s slowing down. The bank’s warning about an upcoming recession came true earlier than expected, as higher energy prices push inflation more than 10%; according to recent data from GDP Office, growth peaked in April but has since slowed considerably with news out today stating Britain’s economic output will slip into a technical recession in autumn.
The pound slipped on the news, falling to almost 2% in just minutes after the announcement from BOE’s Governor Mark Carney, plunging to its lowest since July 2020. The sharp intraday decline took place near the previous weekly low, around mid-1.2400s touched on Wednesday afternoon trading sessions.
