Daily Brief: The Bank Of England Cordially Invites You To Its First Interest Rate Hike In Three Years

Daily Brief: The Bank Of England Cordially Invites You To Its First Interest Rate Hike In Three Years

about 2 years ago3 mins

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The Bank of England (BoE) announced on Thursday that it’s raising interest rates for the first time in three years, before it misses out on end-of-inflation celebrations altogether.

What does this mean?

Covid infections surged to a record high in the UK this week, which means investors were expecting the BoE to delay raising rates till next year to protect the fragile recovery. Not quite: the central bank admitted that while Omicron would take its toll on the UK economy, the strength of the jobs market had given it the confidence – and last month’s decade-high inflation the urgency – to step in. The decision to raise interest rates from 0.1% to 0.25% could be a sign of things to come too: the BoE said more increases will be needed in the next few months to bring inflation – which hit 5.1% in November – down to its 2% target.

Interest rates rise

Why should I care?

The bigger picture: Europe commits to flip-flopping.

Europe’s in the same boat, with inflation in the region hitting a record high of 4.9% last month. The European Central Bank (ECB) announced plans on Thursday to halve the amount of bonds it’s buying next year, which should help bring that figure down. But the central bank also made itself perfectly clear: it’s more than happy to buy more again if Omicron causes more issues.

Eurozone inflation

Zooming out: Turkey has… a plan?

Turkey’s gone the other way: the country’s central bank cut interest rates for a fourth-straight month on Thursday, even though prices were 21% higher in November than the same time a year ago. That could do even more damage to the Turkish lira, which has already lost about half its value relative to the dollar this year. And since it becomes less and less valuable to international savers and investors the longer rates are low, the currency fell another 5% versus the dollar to a record low after the announcement.

Turkish lira falls

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Chinese AI Company SenseTime Might Be Listing This Year After All

SenseTime image

SenseTime is reportedly kicking off its planned stock market listing yet again, proving nothing can keep a plucky Chinese facial recognition company down.

What does this mean?

SenseTime’s journey to the stock market has been anything but smooth. The company first planned to list on the stock market earlier this year, only to put the initial public offering (IPO) on hold when China’s crackdowns risked ruining its clout with investors. But when the country’s regulators didn’t end up sniffing around, the company felt newly emboldened: SenseTime announced earlier this month that the IPO would go ahead as planned.

Until last week, that is, when the US government added SenseTime to a blacklist banning Americans from investing in a host of companies, citing its alleged human rights violations. But the company’s nothing if not resilient: SenseTime’s reportedly managed to get more Chinese investors on board, which should allow it to raise the cash it’s aiming for.

Why should I care?

For you personally: It’s about the long game.

SenseTime might be trying to get in while the going’s good: companies raised 23% more cash in the first three-quarters of this year via IPOs than the whole of last year. But savvy Finimizers know to look beyond day one: when you do, you’ll see stocks of companies that listed to great fanfare this year – including trading app Robinhood and ride-hailing firm Didi – valued at around half as much as they were when they first listed.

2021 IPOs

The bigger picture: r/Reddit hits the stonk market.

SenseTime isn’t the only company that wants to buck that trend: Reddit announced plans earlier this week to list on the US stock market. Investors have been clamoring for this IPO ever since the social media company helped fuel the meme stock frenzy earlier in the year, and it can’t hurt that the company’s spent the last few years building a successful advertising business either.

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