Pound slips against the dollar as interest rates ‘near peak’:
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Pound slides as interest rates ‘near peak’: Sterling falls more than a penny against US dollar
The pound fell and the FTSE 100 flirted with record highs yesterday as the Bank of England raised interest rates but signaled they were now at or near their peak.
The British pound fell by more than a penny against the US dollar above $1.22 as rate-makers dropped recent talk about “forceful action” to bring inflation down.
Buoyed by heavy hints that bank rates won’t rise much further, the FTSE 100 ended the session at just over 7820, just 57 short of its all-time high.
It joined a rally in global stock markets, which were encouraged by hopes that a painful series of rate hikes in Britain, the US and Europe is coming to an end.
In America, the US Federal Reserve raised interest rates by a quarter of a percentage point – a slowdown from previous increases of half and three-quarters of a point.
Pound hit: Sterling fell more than a penny against the US dollar as the Bank of England raised interest rates, but indicated they were now at or near their peak
Federal Reserve Chairman Jerome Powell said more hikes would be needed to ensure inflation is tamed, but markets seized on his comment that “the process of disinflation has begun.”
That boosted Wall Street and especially its giant technology stocks — which were bombed flat last year when interest rates rose — as traders bet that the Fed would become less aggressive in terms of rate hikes.
The tech-heavy Nasdaq shot up 2 percent on Wednesday in the wake of Powell’s comments and shot another 3 percent higher yesterday.
In London, Bank of England Governor Andrew Bailey said Britain now appears to be “round the corner” on inflation, which has eased after reaching 11.1 per cent in October last year, and the Bank now thinks it has passed its peak.
Bailey made it clear that the dilution of the Bank’s language about further rate hikes was significant.
He said, “We’re going to take each game as it comes and look very closely at the evidence as we do and see what we conclude from that.”
Meanwhile, the European Central Bank (ECB) raised interest rates by half a percentage point yesterday and signaled at least another increase of the same magnitude next month.
The president, Christine Lagarde, said risks from inflation were becoming “more balanced,” but stressed that “we’re not done yet” with hikes.
But Carsten Brzeski, head of macro at ING Bank, said the ECB “opened the door for a pause or a slower rate hike after March.”
The German Dax stock index rose more than 2 percent and the French Cac 40 rose more than 1 percent.