AFP, London :
The Bank of England on Thursday froze interest rates at 0.5 percent-but warned borrowing costs could rise more quickly than expected to bring down inflation, sparking fresh turmoil in the markets.
The pound surged against the euro and dollar on the prospect of a rate hike as soon as May, according to analysts, with more increases likely thereafter.
That sent London’s FTSE 100 index tanking 1.5 percent, while eurozone and US markets also resumed their volatile slump on fears of tighter global monetary policy, dealers said.
The BoE’s monetary policy committee “voted unanimously to maintain bank rate at 0.5 percent” and maintain quantitative easing (QE) stimulus, it said in a statement after a regular meeting.
However, the central bank also warned rates could rise sooner than expected “in order to return inflation suitably to target”-and by a “somewhat greater degree” than it had anticipated in November.
On a brighter note, the BoE ramped up its UK economic outlook despite Brexit uncertainty.
Global stock markets have tumbled this week on fears that the US Federal Reserve would also ramp up interest rates more quickly than expected following bright jobs data.
“Monetary policy for major central banks are slowly but surely moving towards normalisation,” NFS Micro analyst Nick Stamenkovic told AFP.
“The Fed is leading the way followed by the Bank of England and European Central Bank. The Bank of Japan is the odd man out but that may change later this year.
“Investors are recognising that the liquidity support for global equity markets is starting to be removed-but talk of a bear market is premature.”
Jacob Rappaport, head of equities at INTL FCStone Financial Inc., agreed that investors now were pricing in tighter monetary policy worldwide.
The Bank of England on Thursday froze interest rates at 0.5 percent-but warned borrowing costs could rise more quickly than expected to bring down inflation, sparking fresh turmoil in the markets.
The pound surged against the euro and dollar on the prospect of a rate hike as soon as May, according to analysts, with more increases likely thereafter.
That sent London’s FTSE 100 index tanking 1.5 percent, while eurozone and US markets also resumed their volatile slump on fears of tighter global monetary policy, dealers said.
The BoE’s monetary policy committee “voted unanimously to maintain bank rate at 0.5 percent” and maintain quantitative easing (QE) stimulus, it said in a statement after a regular meeting.
However, the central bank also warned rates could rise sooner than expected “in order to return inflation suitably to target”-and by a “somewhat greater degree” than it had anticipated in November.
On a brighter note, the BoE ramped up its UK economic outlook despite Brexit uncertainty.
Global stock markets have tumbled this week on fears that the US Federal Reserve would also ramp up interest rates more quickly than expected following bright jobs data.
“Monetary policy for major central banks are slowly but surely moving towards normalisation,” NFS Micro analyst Nick Stamenkovic told AFP.
“The Fed is leading the way followed by the Bank of England and European Central Bank. The Bank of Japan is the odd man out but that may change later this year.
“Investors are recognising that the liquidity support for global equity markets is starting to be removed-but talk of a bear market is premature.”
Jacob Rappaport, head of equities at INTL FCStone Financial Inc., agreed that investors now were pricing in tighter monetary policy worldwide.
