By John Meyer, financial consultant. Eurasia Business News, January 8, 2023
The Monetary Policy Committee of the Bank of England voted to raise the key interest rate by 0.5 percentage points, to 4%. This is its highest level in the last 14 years. Seven members of the committee out of nine voted for the rate increase.
The increase, the British central bank explains, should help reduce the inflation rate to 2%. The new rate will be valid at least until March 23, that is, until the next meeting of the committee.
As noted in a separate report of the committee, the measures of the UK government are already helping to reduce the growth of inflation. In December, UK inflation amounted to 10.5%, while by the end of 2023, the inflation rate should drop to 4% year-on-year according to the forecast of the Bank of England.
“The economy has undergone a series of very large and overlapping shocks. Monetary policy ensures that as the economy continues to adapt to these shocks, inflation will steadily return to the target of 2% over the medium term. Monetary policy is also aimed at ensuring that long-term inflation expectations are tied to the target of 2%,” the central bank said in a statement.
The Bank of England (BoE) is the central bank of the United Kingdom and is responsible for implementing the monetary policy of the country. The main goal of the BoE’s monetary policy is to achieve and maintain price stability, while supporting the government’s wider economic objectives, such as full employment and sustainable growth.
For 2023, the United Kingdom is expected to have a recession by -0.6% according to the International Monetary Fund report published last month.This is a a 0.9 percentage point downward revision from October, reflecting tighter fiscal and monetary policies and financial conditions and still-high energy retail prices weighing on household budgets. Clearly, the country will be in recession while even Russia is expected to experience growth of +0.3%.
The European Central Bank (ECB) also raised today its three key rates by 50 basis points (bps) following its monetary policy meeting on 2 February. This is the 5th hike in a row.
Read also : How to invest in gold
Gold prices were hovering between $1,916 and $1,960 per troy ounce today, gaining nearly 4.12% over the past 30 days. Silver prices were traded between $23.60 and $24.70 per ounce today (February 2, 2023).
The yellow metal has always been an excellent hedge against inflation because its price rises when the cost of goods and services rises. Gold can effectively store value over time, when paper money such as the dollar or euro loses purchasing power due to inflation. Gold is a resilient asset that resists the erosion of inflation and preserves wealth in the medium and long term.
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