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๐๏ธ What if the Central Bank goes all-in?โ
โก Yesterday BOE again adjusted the parameters of its policy, but this time the decision was not unanimous. Eight of the nine members of MPC voted to raise the bank rate to 0.75% from 0.5%, even though Bailey said last month that a moderate tightening would be good for the economy. The fact that opponents of further tightening appeared in the ranks of the MPC was assessed by the market as a ยซworse than expectedยป factor.
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Two more rounds of rate increases are planned before the end of the year, but an increase of more than 2% is unlikely.
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Rate 0.75% brings the cost of borrowing in UK back to pre-coronavirus levels. Consumer prices rose 5.5% in January 2022, the highest since March 1992.
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Bailey noted that the Russia-Ukraine conflict would lead to a significant increase in global inflationary pressures and exacerbate supply chain disruption. Inflation in UK has already reached a 30-year high, which has led to a sharp increase in energy prices. In April, BOE expects inflation to be around 8%, which is about 1% higher than previous forecasts.
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ะกurrent rate hike should reduce the risk of a negative wage growth trend. The survey showed that large and medium-sized businesses plan to increase wages by 4-6% this year (in 2021 it was 2.5-3.5%). British household budget cuts are also expected to be significantly larger than forecast last month.
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Dynamics of the pound were based on more aggressive expectations, at the time of publication all the assets were nervous, but the key zone of 1.30 held out. The market has closed speculative volumes for sale and the overall technical picture is preserved. As long as trading goes below the 1.3200-1.3250 zone, you need to be extremely careful; breakdown of 1.3250 upwards will send quotes to the zone above 1.3420. If the pound hangs below 1.3120-1.30, active bears will return to the market.
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Profits to yโall!