ECB raises interest rates to highest in 22 years

According to a former Bank of England rate setter, the higher number of homeowners with fixed rate mortgages is prolonging the turbulence in the credit market.

Michael Saunders, who served on the Monetary Policy Committee until August, said the time it takes for interest rates to feed through to the economy has “probably increased significantly – not just by a month or two”.

This has left the Bank of England with greater uncertainty over how much to raise interest rates, which markets are forecasting will rise to 5.75% by the end of the year.

The speculation has prompted many mortgage lenders to close deals and raise interest rates in recent weeks.

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What happened overnight?

Asian stocks rose after the Federal Reserve suspended monetary tightening and the People’s Bank of China cut interest rates to shore up the struggling economy.

The Hong Kong benchmark index and Japanese stocks rose. Australian equities rallied after initially paring gains on strong jobs data that pointed to further rate hikes by the central bank.

New Zealand slipped into recession earlier in the year and posted its second straight quarterly contraction, down 0.1 percent, figures from its official statistics agency showed.

The contraction in gross domestic product in the first three months followed a 0.7 percent drop in the December quarter of 2022, Stats NZ said.

Wall Street was mixed after the Federal Reserve indicated it could raise interest rates again this year, although it left rates unchanged on Wednesday.

The S&P 500 climbed 0.1% to end the session at 4,372.59 after oscillating between gains and losses following the Fed’s announcement.

The Nasdaq Composite rose 0.4 percent to 13,626.48 points, while the Dow Jones Industrial Average fell 0.7 percent to 33,979.33 points.

Treasury yields rose following the Fed’s announcement on expectations of future rate hikes.

The benchmark 10-year yield rose to 3.83 percent from 3.77 percent just before the rate decision was announced. It later declined to 3.79 percent, down from 3.82 percent late Tuesday.

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