The Bank of England raised interest rates for the second time in as
many months yesterday, to 5.75%. As a result, the UK has widened its
lead over the US as the country with the highest interest rates in the
industrialized world, after New Zealand. Moreover, the UK is becoming
an increasingly viable alternative to the US as a target for risk-averse
investors. The British Pound is hovering around a record high against
the USD, which can probably expect to suffer prolonged decline against
the world’s majors if it falls behind in attracting risk-free foreign
capital. The Financial Times reports:
“The statement accompanying the rate hike gives few firm
clues as to future interest rate movements, with the Bank of
England…concluding that the risks to the inflation outlook are still
tilted to the upside.”
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