Bank of England predicts inflation will fall more than expected

The Bank of England faces a “difficult balancing act” in its next interest rate decision at lunchtime, analysts say.

Its monetary policy committee is likely to continue the fastest string of rate hikes in three decades to quell inflation that accelerated in February.

But Sonja Laud, chief investment officer at Legal & General, warned that efforts to slow the economy are likely to result in more banks failing as “the weakest links wash to the surface first”.

5 things to start the day off right

1) Federal Reserve raises interest rates despite banking crisis | The central bank pushed for a 0.25 percentage point hike to quell stubbornly high inflation despite ongoing problems for regional banks.

2) Andrew Bailey warns of ‘moral hazard’ following US bailout for SVB customers | Bank of England governor slams US officials for protecting all depositors

3) What caused shock inflation to rise – and what it means for interest rates | The surprise price jump increases the pressure on the Bank of England on the eve of the interest rate decision

4) The London stock market is £200bn smaller than Paris | Fears are growing that the city will become less attractive as companies relocate

5) Google’s Bard chatbot repeats a bug that has cost its stock $120 billion | The tech giant launches a chatbot for public trial but admits it will make mistakes

what happened overnight

Asian markets mostly rallied and the dollar fell, brushing off a retreat by Wall Street on hopes that the Federal Reserve’s latest rate hike would be one of their last.

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Hong Kong led gains, gaining more than 1 percent on a rally in tech companies, while Shanghai, Seoul, Taipei, Mumbai, Bangkok and Wellington were also up.

The gains came even as bank chief Jerome Powell slammed into hopes of lowering borrowing costs later in the year to allay banking sector fears.

The Fed hiked rates by 25 basis points in a widely anticipated move, but adjusted its outlook to a more cautious stance due to the banking crisis.

Sydney, Singapore and Manila slipped. In Japan, stocks closed lower on Thursday, trailing losses on Wall Street.

The benchmark Nikkei 225 index fell 0.2 percent to 27,419.61, while the broader Topix index fell 0.3 percent to 1,957.32.

Wall Street stocks fell after the US Federal Reserve hiked interest rates by 0.25 percentage point in line with market expectations.

The Dow Jones Industrial Average lost 530.49 points to close 1.6 percent at 32,030.11.

The broad-based S&P 500 fell 1.7 percent to 3,936.97, while the Nasdaq Composite fell 1.6 percent to 11,669.96.

In particular, US lenders’ stocks fell after the Federal Reserve warned credit conditions could tighten after recent bank failures and the Treasury Secretary ruled out blanket deposit insurance.

The S&P 500 Banks Industry Group Index fell 3.7 percent to 277.44.

Meanwhile, US Treasury yields fell slightly as interest rates rose. The two-year yield fell to 3.96 percent, while the benchmark 10-year yield fell to 3.46 percent.

Across the Atlantic, the pound rose against the weak dollar, climbing to a seven-week high of $1.23.


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