The Bank of England Admits Defeat on Inflation

Written by: George Prior

The Bank of England has admitted defeat on inflation and the impact will have investors considering their options outside the UK to protect and grow their money, affirms the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The observations from deVere Group’s Nigel Green come as the Bank of England raises UK interest rates by 0.5 percentage points to 2.25% in an attempt to temper soaring inflation amid the cost-of-living crisis. 

The central bank also says the UK is now officially in recession.

He says: “This the seventh consecutive increase, but a smaller rise than many expected. 

“By not announcing a higher rise, it seems as though the Bank of England has admitted defeat on inflation as it focuses on trying to avoid a deep and long recession.”

The deVere CEO continues: “Looking ahead, the beleaguered pound - already one of this year’s worst performing major currencies - will continue to be squeezed hard because of the UK’s downgraded economic outlook.

“As UK financial assets are put under intensifying pressure, we expect that a growing number of investors with exposure to them will consider legitimate overseas options in a bid to protect and grow their money.”

Thursday’s half-point hike means the Bank of England has now hiked UK interest rates by 200 basis points so far this year as it moves to tame red-hot soaring inflation.

As well as inflation running at a 40 year high and a recession to take into account, the Bank also has a new political administration in the picture.

“Friday’s mini-budget is likely to set out various tax cuts and expansionary fiscal measures.  Against this backdrop, the Bank’s job becomes more complicated.  But, at the same time, it is perhaps even more surprising the rate rise wasn’t larger,” says Nigel Green.

He concludes: “We can expect more turbulence for sterling and UK financial assets and, as a result, we are likely to see investors increasing their exposure to overseas financial assets, such as global equity funds.”

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