The Bank of England is the world’s first major central bank to raise interest rates since last year when the pandemic forced all major economies to adopt expansionary monetary policies.
Bitcoin is trading stable at around $ 48,000 at press time, having seen a minor correction of 1.80% so far that day. Its resilience comes despite the wider risk appetite that emerges in global markets when interest rates rise.
The BoE surprised investors when it announced the rate hike on Thursday, claiming it saw warning signs in underlying inflationary pressures, according to a Reuters report. The Monetary Policy Committee voted 8-1 to raise interest rates from 0.1% to 0.25% while expected to keep them lower. According to reports, Governor Andrew Bailey said the BoE was “forced” to prevent the recent price hike from becoming a longer-term problem.
“In the medium term, we are worried about inflation. And we are now seeing things that can threaten that. So we have to act, ”Bailey said, according to the report.
All other major economies have so far maintained their interest rate policies.
The European Central Bank announced Thursday that it would cut security purchases under its Pandemic Emergency Purchase Program (PEPP) in the next quarter, as reported by CNBC. But bond purchases under its Asset Purchase Program (APP) will instead be stepping up to “gradually slow down the pace of their bond purchases over the coming quarters,” the ECB reportedly said.
In the New World, the Federal Reserve announced on Wednesday that it would accelerate the reduction in its monthly security purchases but will not raise interest rates until it completely halts by mid-March. Fed chairman Jerome Powell said the central bank would use its tools, if necessary, to keep high inflation rates from sticking into the economy for long periods of time, adding that the US economy “is so much stronger now ” may be.
While bitcoin was ahead of the Fed’s announcement, it quickly rebounded after Powell announced the central bank’s updated guidelines.
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