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Bank of England and European Central Bank both forecast to raise interest rates by half-point, narrowing differential with the U.S.

The Bank of England and the European Central Bank are forecast to lift their main interest rates by a half percentage point on Thursday, in what will likely narrow the differential between their rates and that of the U.S. Federal Reserve.

The Bank of England is forecast to take interest rates to 4% from 3.5%, and the European Central Bank is expected to take its main rate to 2.5% from 2%, a day after an expected quarter-point rate rise at the Federal Reserve.

Unlike the U.S., core inflation in the eurozone has been rising — climbing in December to a rate of 5.2% from 5% in November. In the U.K., core CPI stayed at 6.3%. Economists at BNP Paribas estimate that wage growth in the U.K. is at its highest level since the early 1990s.

That said, there’s also data pointing to a slowing economy, particularly in the U.K. where the latest purchasing managers index slumped to its worst level in two years.

European Central Bank officials have pushed back at a Bloomberg News report saying the central bank would dial down the pace of rate hikes after making a 50 basis point increase on Thursday. In December, President Christine Lagarde said that “we should expect to raise interest rates at a 50 basis point pace for a period of time.” At the World Economic Forum in January, Lagarde said the ECB was staying the course.

There’s one more key data point for the ECB — the release of the flash estimate of January inflation, due Wednesday.

Economists for ING say the keep thing to watch in the Bank of England decision is the inflation forecast in the scenario of a “constant rate.” “If these show inflation at, or very close to, 2% in a couple of years’ time, then that would be a sure-fire sign that policymakers think we’re close to the peak for the bank rate,” they said.

The pound
GBPUSD,
-0.11%

has climbed 19% from its September low forged during the crisis over the 2022 mini budget, while the euro
EURUSD,
-0.21%

is up 14% from its September low.


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Jake

Jacob Keiter is a husband, a writer, a journalist, a musician, and a business owner. His journey to becoming a writer was one that was paved with challenges, but ultimately led him to find his true calling. Jacob's early years were marked by a strong desire for creative expression. He was always drawn to music, and in his youth, he played in several bands, chasing the elusive promise of fame and success. However, despite his best efforts, Jacob struggled to find the recognition he craved. It wasn't until he hit a low point in his life that Jacob discovered his love for writing. He turned to writing as a form of therapy during a particularly difficult time, and found that it not only helped him to cope with his struggles, but also allowed him to express himself in a way that he had never been able to before. Jacob's writing skills quickly caught the attention of others, and he soon found himself working as a journalist for The Sun out of Hummelstown. From there, he went on to contribute to a variety of publications, including the American Bee Journal and Referee Magazine. Jacob's writing style is reflective of traditional journalism, but he also infuses his work with a unique voice that sets him apart from others in his field. Despite his success as a writer, Jacob also owns another business, JJ Auto & Home, which specializes in cleaning. Jacob's commitment to excellence is evident in all of his endeavors, whether it be in his writing or in his business ventures. Today, Jacob is the author of two books and continues to inspire others through his writing. His journey to becoming a writer serves as a reminder that sometimes our darkest moments can lead us to our greatest achievements.

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