The Bank of England said on Thursday that the UK banking industry was robust enough to weather the turmoil that reverberated through markets this month, following the US Federal Reserve, the Swiss National Bank, and Norway’s central bank in continuing to raise interest rates.
The rate increases show that western central banks are stepping up their efforts to combat inflation even as worries about an impending American recession that may compel the US Fed to lower rates after nine increases in the previous year rise.
Investors have questioned whether the central banks could continue tightening policy, and one reason cited for the severe banking sector stress since the 2008 financial crisis is the relentless rate rises to control inflation.
Hours after the US Federal Reserve announced a rate increase of the same margin, the Hong Kong Monetary Authority on Thursday increased its base rate charged via the overnight discount window by 25 basis points to 5.25 percent.
On April 3 and April 6, the Reserve Bank of India’s (RBI) monetary policy committee will meet to discuss rates.
Notwithstanding a surprise increase announced on Wednesday, the Bank of England hiked rates by another 25 basis points on Thursday and said that it expects the British inflation spike to subside more quickly than before. It said that its Financial Policy Committee determined that Britain’s banking sector remained robust despite “large and turbulent changes” in financial markets across the world brought on by the banking turbulence.
The central bank of Norway increased interest rates by 25 basis points to 3% on Thursday and hinted at further increases.
In a statement on Thursday, the Swiss National Bank declared that UBS’s emergency acquisition of Credit Suisse had “put a stop to the crisis” and increased its benchmark interest rate by 50 basis points to 1.5%.
The failure of two American firms earlier this month caused chaos in banks all over the world, entangling 167-year-old Credit Suisse AG, one of Europe’s major financial companies.
The BoE said that it had seen the “large and turbulent movements” in financial markets but that Britain’s banking sector had held up well after its eleventh consecutive rise. “Events over the last two weeks in particular have shown issues that the international financial system needed to address. And very quick action has been taken,” BoE governor Andrew Bailey told the media.
“The financial crisis has taught us a lot of important things. Nonetheless, I’m certain that the banks in (Britain) are in a far better situation. Of course, we continue to learn from our mistakes.
Changes affect stocks
The banking, financial, and IT company sell-off, along with a mixed trend in global equities, caused the equity benchmark Sensex, which measures the performance of the whole market, to lose 290 points and close the day below the 58000 level on Thursday.
The 30-share BSE Sensex slipped 289.31 points or 0.50 percent to close at 57925.28 after rising for two consecutive days, with 16 of its members reporting losses.
The index saw a high of 58396.17 and a low of 57838.85 throughout the day.
According to Vinod Nair, director of research at Geojit Financial Services, “the rebound was shortlived owing to a slow start in the European market led by a 50 bps rise by the Swiss National Bank.”
Stocks of Adani
In keeping with the dismal trend, five of the ten listed Adani stocks finished in the red. The losses occurred a day after Adani Power was added to the framework for short-term additional surveillance measures (ASM) by the stock exchanges.
Adani Electricity decreased 1.30 percent to Rs 201.20, Adani Ports 0.36 percent to Rs 654.95, ACC 0.06 percent to Rs 1,738.15, and Ambuja Cements 0.98 percent to Rs 372. Adani Enterprises fell 1.19 percent to Rs 1,792.60 on the BSE.
