In this image illustration, the new Bitcoin token is depicted on £10 notes.
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On Thursday, the British pound was set for its largest daily decline since the emergence of the Corona virus pandemic, after the Bank of England warned of a sharp slowdown in growth in the British economy.
In a widely expected moveThe Bank of England policy makers voted to raise interest rates for the fourth time in a row since December. But policy makers also warned that GDP growth is expected to slow sharply and inflation could peak at 10% later this year.
“We are on that narrow path now. The immediate reason for raising the bank rate at this point is that it is not just the current situation of inflation, what is to come and of course what it could mean for the upcoming inflation outlook, but Bank of England Governor Andrew Bailey said on Thursday at a press conference. .
In its updated forecast, the bank said it now expects GDP to decline in the last three months of this year. Bailey said the UK is ready for a “very sharp slowdown” but added that it may not meet the criteria for a technical recession – two straight quarters of contraction.
Yields on 10-year gold bonds, the country’s sovereign benchmark, approached a session low of 1.85%, and the FTSE 100 rose 1.6% – on course for its best day since March 14.
“We are seeing a clear depreciation of the British pound through 2022, making it the third worst performing currency,” Jesus Capra Guisasola, senior associate for global capital markets at Validus Risk Management, said in a quick research note.
“MPC members now appear to be more concerned about the prospects for the UK economy indicating a clear path to recession.”
The Bank’s Monetary Policy Committee approved a 25 basis point increase by a 6-3 majority, while raising the policy rate to 1%. The bank said minority members favor an interest rate increase of 0.5 percentage point to 1.25%.
Like many central banks around the world, the Bank of England is tasked with steering the economy through increased inflation exacerbated by Russia’s unprovoked attack on Ukraine.
— CNBC’s Sam Meredith contributed to this article.