June 21. The Bank of England urged not to use monetary policy to stabilize the pound
Hugh Pill, chief economist at the British central Bank, said that the Bank of England should focus its monetary policy on the main goal of controlling inflation, rather than trying to stabilize the exchange rate or economic activity.
Pill also noted that the regulator should pay attention to what is happening in the foreign exchange market and in other central banks, but at the same time realistically assess their capabilities.
«Monetary policy is an inaccurate tool, not a panacea,» the economist stressed.
A day earlier, a member of the Monetary Policy Committee, Catherine Mann, suggested that a more significant increase in interest rates in the short term could compensate for the weakening of the pound caused by inflation.
In December, the Bank of England became the first of the key central banks to raise the cost of borrowing after the pandemic and has since raised the key rate five times, bringing it to 1.25%. Pill suggested that further policy tightening may be required in the coming months, as inflation is approaching 11%.
Regards, PR-Manager ForexMart
June 22. Inflation in the UK has updated the maximum in more than 40 years
According to the Office for National Statistics of the UK, in May consumer prices jumped by 9.1% compared to the same month last year. As a result, inflation in the country accelerated to the highest in more than 40 years. The current indicator coincided with analysts' forecasts.
In April, the annual inflation rate was recorded at 9%.
On a monthly basis, consumer prices in May rose by 0.7% compared to last month after a jump of 2.5% in April. Experts expected an average increase of 0.6%.
Analysts note that the increase in inflationary pressure in the UK is mainly due to higher prices for food and energy, including electricity, gas and gasoline.
Prices excluding food, alcohol, tobacco and energy (core inflation, CPI Core) in May increased by 5.9% in annual terms and by 0.5% monthly. In April, their growth was 6.2% and 0.7%, respectively.
Retail prices (RPI index) soared by 11.7% year-on-year after rising by 11.1% a month earlier. It is worth noting that it is the RPI index that is used by British employers when negotiating salaries.
June 23. The Asian market fell after Powell acknowledged the risk of a recession
The stock market of the Asia-Pacific region on Thursday morning is mainly reduced. Investors continue to assess the prospects for monetary policy after the head of the US Federal Reserve Jerome Powell acknowledged the risk of a recession.
In particular, the Japanese Nikkei 225 fell to 26.039 points, the South Korean KOSPI fell to 2.314. The Australian ASX 200 fell to 6.425. Hong Kong Hang Seng – to 21.008.
The Chinese Shanghai Composite is growing – up to 3.320.15 points. Shenzhen Component – up to 12.514.73.
Investors’ fears intensified after Jerome Powell said that a recession in the US economy is a very likely outcome. A sharp increase in interest rates can lead to an economic downturn.
At the same time, Powell acknowledged that the rate will continue to rise, but the Open Market Committee (FOMC) is monitoring the incoming data, which implies strict control over the situation, and monetary policy tightening will not be carried out solely on autopilot.
Regards, PR-Manager ForexMart
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