Bank of England raises interest rates as inflation surges

Good morning.

As expected, the Fed struck a hawkish tone on inflation following its meeting on Wednesday.

The US central bank said it will ramp up the tapering of its huge bond buying programme, adding it expects three interest rate rises next week.

The move to tame price pressures came after US inflation picked up to 6.8pc in November, the highest rate since 1982. Fed chairman Jay Powell noted the risks of omicron, but played down the economic risk of the new variant.

It comes ahead of the Bank of England’s interest rate decision, due at midday. The European Central Bank will also be making its latest policy update this afternoon.

5 things to start your day 

1) Inflation surge gives gives Andrew Bailey an even bigger headache  Costs are likely to keep rising even further, putting the Monetary Policy Committee under huge pressure to raise interest rates

2) Heathrow cleared to increase charges by seven times rate of inflation  The rise will apply for the first six months of next year as airlines bosses and the airport are arguing over a final deal

3) Rishi Sunak urged to ‘come out of hiding’ to save pubs and restaurants  Businesses have called on the Chancellor to provide financial support as more restrictions are implemented

4) Sadiq Khan threatens £20 council tax rise to bail out the Tube  Mayor also plans to raise age for free travel on London’s public transport network unless Government gives TfL a multibillion-pound bailout

5) New German chancellor encourages more immigration  Olaf Scholz says he will allow multiple citizenships, meaning immigrants can retain their existing nationality while also becoming Germans

What happened overnight 

All three main indexes on Wall Street rallied after the Federal Reserve announced it was speeding up the taper of its pandemic financial support, and much of Asia followed suit: Tokyo was up more than 1pc as the dollar’s rise against the yen helped exporters, while Shanghai, Singapore, Seoul, Taipei, Manila and Jakarta were also up.

Coming up today

  • Corporate: Go-Ahead Group, IntegraFin, Hyve Group (Full-year results); ITM Power (Interims); Petrofac, Serco, Hunting (Trading update)
  • Economics: Bank of England interest rate decision (UK), ECB interest rate decision (EU), PMIs (UK, US, EU), jobless claims (US), employment (EU), housing starts (US)

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