Interest rates LIVE: Bank of England poised to shock markets TODAY with unexpected hike

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Hikes could come as early as mid-2022, HSBC has predicted, which would make it the first major central bank to start raising interest rates from its record low of 0.1 percent.

The BOE was not expected to start lifting the bank rate until late 2023 or early 2024 but it is suspected that the fear of rocketing inflation will spur them into action sooner.

The bank slashed interest rates during the pandemic in the hope of encouraging cash-strapped businesses to borrow cheaply and pushing households to spend rather than save.

But now the central bank will be keen to keep a lid on the rising cost of living.

Higher interest rates would come as a welcome change to long-suffering savers but would be inevitably bad for borrowers.

READ MORE: Brexit LIVE: UK surges ahead of EU as eurozone slumps behind US

Interest rates live

Interest rates LIVE: BOE poised to shock markets with unexpected hike (Image: GETTY)

Interest rates Live

Higher interest rates would come as a welcome change to long-suffering savers (Image: GETTY)

There are concerns bubbling within the central bank that lifting rates too early could dampen the economic recovery.

However, others argue inflation and rising prices could soon spiral out of control if rates are not raised soon.

The National Institute of Economic and Social Research group, Britain’s oldest independent economic research institute, said inflation could hit 3.9 percent early next year – almost double the Bank of England’s target.

This figure should fall back to two percent the year after the central bank bites the bullet and hikes the rates.

The announcement will come at 12pm today with questions put to the Bank of England governor, Andrew Bailey, at 1pm.

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11:15 FTSE 100 flat as investors await BoE rate decision

London’s FTSE 100 has hovered today as investors hold back from making any big bets ahead of the Bank of England’s rate setting announcement at 12pm today.

The blue-chip FTSE 100 index was up 0.01 percent at 7126.1 by 8:45am GMT, with banks, oil stocks and precious and base metal miners down between 0.2 percent and 1.8 percent.

The FTSE 100 has gained 10.2 percent this year on support from dovish central bank policies, although investors have started to question the longevity of such policies due to rising inflation in the UK.

10:54 Living costs rising at fastest rate in 25 years

Living costs are rising at the fastest rate in 25 years, according to a new study.

UK service sector companies saw the highest level of both cost and price inflation in a quarter of a century in July.

In a sign of inflation, businesses in the sector – which include restaurants, hairdressers as well as banks and insurers – were forking out more for wages, transport and food, with this figure increasing at an alarming rate.

Predictably, companies are beginning to pass on these costs to customers, with selling prices rocketing to the highest level since 1996.

This worry that higher inflation will hamper growth could force the Bank of England to announce that they will hike interest rates earlier than expected.

Inflation Live

Companies are beginning to pass on rising costs to customers (Image: GETTY)

10:39 Sterling slips ahead of BOE ‘Super Thursday’

After recording its strongest week of the year last week, the Great British Pound has dropped nearly 1 percent ahead of the Bank of England’s monetary policy announcement at midday today.

The announcement could spark some fresh volatility into the British pound.

George Vessey, Currency Strategist at Western Union Business Solutions, said: “Signs of slowing growth are already emerging in the UK, with evidence of the manufacturing rebound peaking.

“The services sector continues to be bogged down by restrictions on travel and tourism and the decoupling of Covid cases and hospitalisations is still being debated.

“These factors could deter the BOE from sounding too hawkish today, which could weigh on pound in the short term.”

However, Mr Vessey went on to say that the medium-term outlook was “optimistic” thanks to the UK’s strong vaccination campaign.

10:28 Earnings lift European stocks to all-time highs ahead of BoE decision

European stocks are now on course for their strongest weekly performance in three months.

Today saw European stocks hit record highs as strong earnings from Novo Nordisk and Siemens helped outweigh weakness in miners and banking shares, with investors eyeing a policy decision from the Bank of England later in the day.

Danish company Novo Nordisk rose 4.1% after it raised its full-year outlook and posted above-forecast quarterly earnings on strong sales and demand for its new obesity drug.

German industrial firm Siemens climbed 3.6% as it lifted its profit forecast for the third time this year.

Stocks Live

Today saw European stocks hit record highs (Image: GETTY)

10:20 Daily market rates

Today’s Interbank Rates at 09:12 against sterling. Movement vs yesterday.

Euro €1.174 –

US dollar $1.391 –

Australian dollar $1.879 ↓

South African rand R20.01 ↑

Japanese yen ¥152.5 ↑

10:05 Sterling set for volatile afternoon

Jeremy Thomson-Cook, Chief Economist at international business payments specialist Equals Money, has insisted the key dynamic today will be what the Monetary Policy Committee thinks about the continued use of stimulus.

Mr Thomson-Cook said: “Two members of the nine-person committee have made speeches in the past month hinting that they would prefer to end stimulus early so any voting record on QE that is less split than 7-2 will be seen as a disappointment and could limit sterling strength.

“From an economics point of view, we must keep an eye on what the Bank of England thinks on unemployment given people who may have been furloughed from certain sectors may not be able/willing to take on jobs in new roles.”

He goes on to say that Sterling could pull higher today but this hinges on how much the Bank of England focuses on the Delta variant and furlough.

09:48 Mortgage warning: ‘rate war’ on the horizon

Mortgage owners have been urged to act as some believe a “rate war” could emerge as stamp duty changes begin to harm homeowners.

The stamp duty “holiday” was created to boost property purchases as the pandemic ravaged the economy but the long term impacts of the scheme may leave homeowners at risk.

Simon Bath, the CEO of iPlace Global, creators of property platform Moveable, discussed how the stamp duty changes may have forced homeowners to rush key steps in the mortgage process.

Recently, a report from Royal London showed 81 percent of mortgage holders don’t have income protection insurance.

Mr Bath said: “The past year or so, with the impact of the stamp duty holiday and the rush to move to more rural locations, has left thousands missing key steps in an already tricky process.

“One of the key ones that people always forget, and are rarely reminded about in my experience, is life insurance or mortgage protection.”

New research from Moneyfacts.co.uk also showed now may be the best time to remortgage or find a new deal as lenders are on the verge of massive change.

The Bank of England’s latest money and credit report indicated the number of remortgage approvals rose in June and in recent weeks, Moneyfacts.co.uk recorded various mortgage lenders launching “attention-grabbing sub-one percent” mortgage deals to entice new borrowers.

09:35 European Central Bank to keep rates low for longer

The European Central Bank signaled that its strategy for supporting the eurozone economy is keeping interest rates low for longer.

This decision comes after a surge in Covid-19 cases, driven by the highly contagious Delta variant, which triggers new social restrictions and could crush the region’s large tourism industry.

ECB President Christine Lagarde said at a news conference in July, that the pandemic continued to cast a shadow over Europe’s economic recovery, despite strong growth being expected over the coming months. 

She said: “The Delta variant of the coronavirus could dampen this recovery in services, especially in tourism and hospitality.”

09:21 Bank of England Governor Andrew Bailey will NOT follow Brussels’ rules

Brussels has so far refused to grant the UK so-called ‘equivalence’ status in a range of areas.

Equivalence would see the bloc formally recognise Britain’s financial regulations as similar enough to its own that businesses can trade across borders.

EU firms in multiple areas have already been granted the equivalence recognition by the UK.

Brussels is accused of deliberately withholding the status in a petty bid to lure businesses away from London.

The only way the EU has indicated it will grant equivalence to the UK is if it vows to follow Brussels rules.

However, Bank of England Governor Andrew Bailey has made clear the suggestion is a red line that must not be crossed.

09:11 Will Rishi Sunak out-muscle the EU?

Mininsters could tear up EU bureaucracy on banking rules to help give London a post-Brexit boost

Rishi Sunak is understood to be looking into removing restrictions on bankers’ bonuses.

Under EU rules bonuses cannot exceed two times an annual salary.

The restrictions were opposed by the UK Government of the time but were forced through by the EU.

Now, freed from Brussels, the Chancellor is said to be mulling over ditching the requirements to help boost the UK’s competitiveness on the world stage.

Mr Sunak said he wanted to make the UK’s financial sector “the most trusted and competitive place to do business”.

08:53 Britain’s ‘Investment Big Bang’ starts now

In an open letter, Boris Johnson and Rishi Sunak have called on businesses to unleash an “investment Big Bang” to turbocharge growth in Brexit Britain.

The Government is asking powerful institutional investors to look at long-term investments in UK assets to help the economy bounce back from the pandemic.

They want investors such as pension funds to switch their strategy to put more money into UK start-ups, rather than listed securities such as shares traded on the London Stock Exchange.

The letter said: “It’s time we recognised the quality that other countries see in the UK, and back ourselves by investing more money into the companies and infrastructure that will drive growth and prosperity across our country.”

08:43 Rishi Sunak’s capital gains tax raid

Tax experts are warning that Chancellor Rishi Sunak is planning a massive capital gains tax raid as he searches for ways to fund the Government’s huge Covid bailouts. 

Investors are already selling assets such as property and investments in anticipation of more punitive capital gains tax (CGT) rates in the next year. 

The tax currently generates a healthy £10 billion every year for HM Revenue & Customs, with that figure expected to rise. 

Tax specialists are urging savers and investors who likely to make a capital gain to start planning well in advance to reduce their exposure, as Sunak could hike CGT rates in his Autumn Statement or March 2022 Budget.

08:35 Unemployment could surge after the furlough scheme

The UK may have rebounded sharply from its pandemic recession, but central bankers will have to consider the 1.9 million people still on the Government’s furlough program.

The program of supporting wages is due to finish at the end of September but the concern is that unemployment will surge in the coming months.

“You have a lot of people on furlough who used to work in retail or air travel,” Elizabeth Martins, senior economist at HSBC, told Bloomberg.

“You can’t just persuade them to be truck drivers,” she added.

08:24 Could borrowing costs be pushed below zero?

The Bank of England could open up the possibility of pushing borrowing costs below zero if they take a step closer to tightening their monetary policy. 

The move could also unwind £900 billion Government bond purchases. 

Officials at the Bank of England have signaled that they want interest rates higher than their current level before selling off some of the government bonds they’ve built up through their quantitative easing program.

Adopting negative rates as a potential policy tool could allow them to bring forward the moment when they scale back their bulging balance sheet.

08:07 BNP Paribas economist predicts hike in 2022

BNP Paribas chief European economist, Paul Hollingsworth, has predicted the hike in interest rates to begin in the summer of 2022.

He forecasts the rise in August 2022 with risks skewed toward earlier tightening of monetary policy.

“Two consecutive months of significantly higher-than-expected inflation [a surprise of 30bp to the BoE’s Q2 forecast] coupled with a spate of recent speeches by the MPC members with a more hawkish tilt has thrown into question whether the process of policy tightening might begin earlier than expected,” Hollingsworth added.

Roy Walsh

Roy Walsh

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