Here’s a summary of Stock Market Today(May 5, 2022) :
- U.S. markets: U.S. stock futures started off lower following the Federal Reserve’s interest rate hike announcement. However, the market closed sharply higher after Federal Reserve Chairman Jerome Powell’s statement eased some investor concerns. Nasdaq: https://www.nasdaq.com/articles/stock-market-news-for-may-5-2022
- Indian markets: The frontline indices, Sensex and Nifty, ended with marginal gains on May 5th. The Indian Express: https://indianexpress.com/article/business/market/equity-markets-stocks-shares-bse-sensex-nse-nifty-oil-rupee-prices-rbi-rate-hike-may-5-7902197/
- Nigerian markets: The Nigerian stock market continued its bullish trend, with the NGX ALSI jumping 1.42%.
The Bank of England on Thursday raised interest rates to their highest degree in 13 years in a bid to tackle skyrocketing inflation.
In a widely expected action, policymakers at the BOE elected a 4th successive rate increase considering that December each time when millions of U.K. households are coming to grips with skyrocketing living prices.
The Bank’s Monetary Policy Committee authorized a 25-basis point boost by a majority of 6-3, taking the base interest rate up to 1%. The Bank said the members in the minority favored to enhance interest rates by 0.5 percentage indicate 1.25%.
Like many central banks all over the world, the BOE is entrusted with guiding the economic climate via an inflation surge that has been aggravated by Russia’s unwarranted onslaught in Ukraine.
Annual U.K. rising cost of living hit a 30-year high of 7% in March– greater than three times the BOE’s target level– as food and also power costs remain to surge. U.K. customer confidence, on the other hand, plunged to a near record low in April amid anxieties of reducing economic growth.
The Bank expects U.K. inflation to rise to about 10% this year as a result of the Russia-Ukraine battle and lockdowns in China. It has also warned prices are most likely to increase faster than revenue for many people, strengthening the price of living dilemma.
BOE Governor Andrew Bailey had actually formerly cautioned the Bank is walking a “slim path” between development and also rising cost of living– as well as suggested that the Bank may aim to take a more incremental strategy to tightening up rather than complying with the united state Federal Reserve with a 50-basis point hike.
The U.S. central bank on Wednesday increased its benchmark interest rate to a target rate range of in between 0.75% as well as 1%. It noted the Fed’s largest rate hike in two decades and its most hostile step yet in its battle versus a 40-year high in inflation.
Sterling traded down 1.2% at $1.2468 soon after the rate choice. The U.K. currency got rid of gains from the previous session, falling back toward its lowest level because July last year.
“The Bank of England (BoE) hiked by 25 bps as expected, but Haskell, Mann, & Saunders voted for a 50 bps hike. Why? With inflation sitting at a 30-year high of 7%, today’s dovish hike is a sign that policymakers are now entering increasingly choppy waters when it comes controlling the inflation narrative. Generally speaking, the BoE does not want to see inflation entering strongly into wages. Once it does, the issue becomes systemic and generates a force of its own, which becomes exceedingly difficult to control.
“However, higher rates will inevitably place pressures on growth, as well as increasing cost burdens on U.K. households – the latter being an issue that many consumers are already having to grapple with. Given that energy prices are continuing to rise against a backdrop of continued geopolitical unrest, this fourth consecutive rate increase from the BoE presents the unique difficulties at hand for the Monetary Policy Committee. For now, the markets will be focused on the medium-term growth outlook, which has been revised down lower, with the BoE taking the view that GDP will slow sharply due to the global energy prices rises and tradable goods prices.
“In summary the meeting was a ‘stagflationary’ acknowledgement. Lower growth, with inflation now expected to peak at a staggering 10% this year, may well mean that the central bank could be set to pause its hiking cycle around the summer, with more rate cuts set for 2023. Looking ahead, this could be a negative for the GBP.”
Giles Coghlan (Chief Analyst, HYCM)
Omar El-Gazzar, FX Dealer, at Crown Agents Bank comments on the BoE interest rate decision:
“A key day today – The Bank of England has raised interest rates by 25 basis points as was widely expected, putting the UK base rate at 1%, its highest level since 2009. The BOE faced a tough decision going into the meeting as the committee tried to balance increased inflation projections against lower growth estimates. The vote however came in at 6-3 for a rise, against an 8-1 expectation; this more dovish outcome has pushed cable firmly below 1.25”
Omar El-Gazzar, FX Dealer, at Crown Agents Bank
Victor Trokoudes, chief executive and co-founder of saving and investing app Plum comments on the latest interest rate hike from the Bank of England, and what it means for households alongside the rising cost of living:
“Another rate hike is no surprise at this point but savers won’t see any benefits against high inflation and need to be planning to protect and grow their savings.
“Spiralling inflation, rising living costs, a huge jump in the energy price cap and Russia’s invasion of Ukraine have all put pressure on household savings. As costs rise, budgets for the average person will be stretched ever thinner and this is likely to be the case for a long time.
“Interest rates may eventually dampen inflation, but the average person needs to make sure they are still building their savings pots and that what they do have is protected against the impact of cash devaluing.
“Budgeting sensibly to make sure money is being put into savings regularly is incredibly important but the best way to make the most of this cash is to start investing. Savings that people are comfortable they won’t need in the near future should be put into investments, either through a fund of companies or buying shares in those individual companies. This is the best way to tackle the eroding value of that cash caused by inflation, and will handle rising costs of utilities and everyday expenses. Keeping it locked away in a bank will only cause it to lose value over time, which many simple cannot afford right now.”
Victor Trokoudes, chief executive and co-founder of saving and investing app Plum
