Share Prices & Company Research


20 December 2022

Market Round-Up

The Bank of England raised interest rates by 50bps to 3.5%, the highest level in 14 years, in a split decision from the central bank’s Monetary Policy Committee. This marks the ninth consecutive rate rise in MPC meetings, the most aggressive set of rises since 1989.

The announcement was generally in line with market expectations, and although the MPC delivered a smaller rate rise than the previous hike of 75bps, the tone from the bank once again remained hawkish.

GDP projections were slightly stronger than the previous MPC meeting, with Q4 2022 GDP now expected to decline 0.1%, compared with the previously projected 0.3%. Following the announcement, Sterling extended its losses against its peers and the price of UK government debt rallied. The currency fell 0.2% against the dollar, and the yield on both the two and 10-year government bond fell 0.07 per cent to 3.36 and 3.23 per cent, respectively.

This comes after UK inflation dropped slightly to 10.7% in November, driven by a decrease in the price of fuels and second-hand cars. The central bank believes inflation “has reached its peak” and will continue to “fall gradually” over the first quarter of next year but expressed concerns of UK companies raising prices too fast for too long.

The bank also warned that ‘the labour market remains tight,’ with the vacancies-to-unemployment ratio remaining at a “very elevated level" despite unemployment rate rising slightly to 3.7% in the 3 months leading to October. A large concern for the MPC is private sector wage growth, currently at around 7 per cent. The tightness of the labour market and resulting wage pressures could result in interest rates needing to rise further, extending the economic pain for UK households.

Some positive news last week was that UK consumer confidence edged up two points in December, according to research group GfK. However, the index, which measures how individuals view their personal finances and wider economic prospects, remains at its lowest sustained levels in almost 50 years.
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Market Round-Up
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