Daily Brief: The Bank Of England Is Just Going To Keep Rate Hikes On Hard Repeat, Then

Daily Brief: The Bank Of England Is Just Going To Keep Rate Hikes On Hard Repeat, Then

almost 2 years ago3 mins

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The Bank of England (BoE) raised interest rates for the fourth time in a row on Thursday, and the central bank has no plans to change its tune just yet.

What does this mean?

Economists knew the BoE was bound to act when UK inflation hit a 30-year high in March, even after three rate hikes since December. And they were right: the central bank raised rates for a fourth-straight time by 0.25% to 1% – the highest they’ve been since 2009, and the fastest pace of hikes in 25 years. The BoE also said it was thinking about starting to sell some of the $1 trillion-plus worth of bonds it’s accumulated since the financial crisis. That would push up borrowing costs even more, which should help dampen the country’s spending and, in turn, inflation.

UK interest rates

Why should I care?

The bigger picture: Not even the BoE is optimistic.

The central bank said it’s now expecting inflation to top 10% by the end of the year, in part because the government is planning to lift the cap on energy suppliers’ prices by another 40%. And since wages aren’t exactly likely to climb in kind, the BoE said it thinks “real” household disposable incomes – that is, adjusting for inflation – will plunge nearly 2% this year. That’s a problem for you and the economy: household spending is so crucial that the BoE now reckons the UK economy could fall into a recession before the year’s out.

Zooming out: Turkey puts its fingers in its ears.

Turkish inflation is on another level entirely: data out on Thursday showed that consumer prices rose by 70% last month compared to April 2021. It isn’t surprising given that the government cut interest rates last year, even though economists almost unilaterally agree that lower rates cause higher inflation. And with the Turkish government ignoring all the evidence that proves those eggheads right, it probably won’t change tact anytime soon.

Turkish inflation

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Lufthansa Reported A Worse-Than-Expected Quarterly Loss

Lufthansa image

It looks like you’ve caught a severe case of the travel bug: Lufthansa announced on Thursday that it more than doubled its revenue last quarter.

What does this mean?

Europeans emerged from another wave of Covid with the majesty of Free Willy last quarter, and Lufthansa was only too happy to help them return to the big wide world: the airline almost tripled the number of seats on offer last quarter from the same time in 2021. Throw in a cargo business that outperformed thanks to ongoing supply holdups, and the company’s revenue more than doubled from the same time the year before. And while the airline posted a higher-than-expected loss on the back of painful energy costs, it also said it was confident that demand would be strong enough to pass some of them onto customers going forward.

Lufthansa revenue
Source: Lufthansa

Why should I care?

For you personally: Hot vax summer, take two.

Lufthansa’s not wrong: there are more and more signs that the rebound in vacation travel hasn’t peaked yet, with payments giant Visa talking about how many summer travel booking transactions it’s seen this year. That could present an opportunity for you, since travel-related stocks are yet to see a post-pandemic resurgence like, say, tech companies and banks experienced last year. You might want to be quick if you’re keen to buy in, though: an index tracking some of the world’s biggest airlines has already outperformed the US stock market by 10% this year.

Zooming out: Airbnb has accepted your booking.

It isn’t just the airlines benefiting from globetrotters trotting the globe: Airbnb said this week that its revenue surged by a better-than-expected 70% last quarter, and it’s expecting that momentum to continue this quarter. It’s already off to a good start: it had 30% more nights booked for the summer travel season by the end of April than it did at the same time in 2019.

Airbnb revenue
Source: Airbnb
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