BoE continues to raise rates, goes for 25bps hike this time

The Bank of England on Thursday followed the US Federal Reserve and the Swiss National Bank in ploughing on with interest rates hikes, saying the UK banking sector was strong enough to withstand the instability that rippled through markets this month. The UK central bank raised rates by 25 basis points (100bps = 1 percentage point) to 4.25%.

Relentless rate hikes to rein in inflation are among factors blamed for the worst banking sector stress since the 2008 financial crisis and investors had questioned whether the central banks could press on with tightening policy. While recent market jitters have eased, they have prompted investors to adjust to more challenging economic and lending conditions ahead. The index of top European banks was down 1.7%.

Earlier on Thursday, the Swiss National Bank raised its benchmark interest rate by 50bps and said Credit Suisse’s takeover by its Swiss rival UBS had averted a financial disaster. Asian policymakers are also seeking to calm investor nerves about AT1 bonds but the ongoing turbulence is likely to keep a lid on fresh debt sales. Norway’s central bank raised its benchmark interest rate by 25bps to 3% on Thursday to rein in inflation.