Market Loop - 🔗UK interest rates hit 14-year high

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16th December 2022

Bite-sized business news from the UK and beyond

Good morning Avatar 2 hits cinemas today, 13 years after the original became the highest-grossing film in history. It’s hoped that the release will reinvigorate the box office which has struggled to fully recover from the pandemic. However reviews so far have been mixed with one critic labelling it ‘a soggy, twee, trillion-dollar screensaver’.

Today's stories

UK interest rates hit 14-year high
Currys cuts profit targets

ECONOMY
UK interest rates hit 14-year high

What happened?
Yesterday, as predicted, the Bank of England raised the base rate to the highest level since 2008. It follows similar moves by central banks in the US and Europe in a bid to cool soaring inflation.

Driving the news: On the heels of better-than-expected inflation data on Wednesday, the Bank of England raised its base interest rate by a 0.5 point to 3.5%, ending a months-long series of 0.75 percentage point rate hikes.

The change of pace is a reflection of recent economic data that has signalled price growth is slowing and may have even reached its peak.

It comes within 24 hours of the Swiss and Norwegian central banks, European Central Bank and US Federal Reserve also raising their rates.

The Bank of England still sees UK inflation – currently at 10.7% - “some way below” the 2% target from 2024, but “very high” in the near-term. It also expects recession for a “prolonged period”.

The decision will raise the cost of borrowing for millions of would-be homeowners. There’s evidence the housing market has already weakened, the number of property purchases has fallen to below 60,000 a month, the lowest since 2013.

Zoom out: Price growth may be easing across Europe and the US but central banks will likely keep interest rates high for some time to keep demand contained. Most experts aren’t holding their breath for rate cuts before 2024.

Other stories to keep you in the loop

Heathrow ground handling staff call off strike
Goldman Sachs bankers brace for hefty cut to bonuses
Influencers who promoted stock on social media charged with $100m fraud scheme
Visa pledges $1bn investment into African digital payments sector
Court blocks Mastercard’s bid to exclude 3m dead people from collective action lawsuit
Elon Musk sells $3.6bn Tesla shares after wealth drops $109bn since January

RETAIL
Currys cuts profit targets

What happened?
Yesterday Currys reported that it was downgrading its profit expectations for the coming year as it warned squeezed consumers were shopping less.

How did we get here?
In the past six months the cost of living crisis has hurt Currys performance with sales falling 8%. The company says customers are trading down to cheaper brands and opting for more energy efficient washing machines and tumble dryers in response to rising utility bills.

Currys is the UK’s #1 electronics retailer and also has a dominant position in the wealthy Scandinavian market where trading has been particularly weak this year. The company said heavy discounting by rivals in Sweden, Denmark, Norway and Finland, while it kept its prices the same, meant it made virtually no money across the region.

Currys said it now expected full year profits to be between £100m-£125m – a decrease of £25-30m.

Elsewhere...Currys is still paying the price for its disastrous merger with Carphone Warehouse in 2014. The deal coincided with the decline of the high street and in 2020 the group was forced to close 531 standalone mobile phone stores. This meant a £511m one-off writedown on the value of the Carphone business year.

Stat of the day

The mobile games market is set to fall by 6% this year to $92.2bn, the first decline since the beginning of the smartphone era

Interesting links from around the web

How to tell if you’re an introvert or extrovert
The 100 best books of 2022
Watch: “I won a $28m jackpot. Ask me anything.”

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soggy twee trilliondollar screensaver base interest rate recent economic data Norwegian central banks Bitesized business news US Federal Reserve UK interest rates European Central Bank

Market Loop - 🔗UK interest rates hit 14-year high

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