FOMOmicron

Image source: Romanova Ekaterina and PSboom - Shutterstock

What's going on?

The Bank of England (BoE) announced on Thursday that its raising interest rates for the first time in three years, before it misses out on end-of-inflation celebrations altogether.

What does this mean?

Covid infections surged to a record high in the UK this week, which means investors were expecting the BoE to delay raising rates till next year to protect the fragile recovery. Not quite: the central bank admitted that while Omicron would take its toll on the UK economy, the strength of the jobs market had given it the confidence and last months decade-high inflation the urgency to step in. The decision to raise interest rates from 0.1% to 0.25% could be a sign of things to come too: the BoE said more increases will be needed in the next few months to bring inflation which hit 5.1% in November down to its 2% target (tweet this).

Why should I care?

The bigger picture: Europe commits to flip-flopping.
Europes in the same boat, with inflation in the region hitting a record high of 4.9% last month. The European Central Bank (ECB) announced plans on Thursday to halve the amount of bonds its buying next year, which should help bring that figure down. But the central bank also made itself perfectly clear: its more than happy to buy more again if Omicron causes more issues.

Zooming out: Turkey has a plan?
Turkeys gone the other way: the countrys central bank cut interest rates for a fourth-straight month on Thursday, even though prices were 21% higher in November than the same time a year ago. That could do even more damage to the Turkish lira, which has already lost about half its value relative to the dollar this year. And since it becomes less and less valuable to international savers and investors the longer rates are low, the currency fell another 5% versus the dollar to a record low after the announcement.

Originally posted as part of the Finimize daily email.

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