16th December 2022
Bite-sized business news from the UK and beyond
- UK interest rates hit 14-year high
- Currys cuts profit targets
UK interest rates hit 14-year high
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
Currys cuts profit targets
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.
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