AFP

The Bank of England on Thursday hiked its main interest rate for the fifth straight time, as it forecast decades-high British inflation to soar further this year to above 11 percent.

BoE policymakers agreed at a regular meeting to increase the cost of borrowing by a quarter-point to 1.25 percent, the highest level since the global financial crisis in 2009.

Following the announcement, the pound slumped one percent against the dollar before rebounding.

Analysts bet that the BoE would eventually mirror the Federal Reserve by aggressively hiking rates.

– BoE lags Fed –

For now, the Bank of England is avoiding “shock and awe tactics being employed across the Atlantic”, said Laith Khalaf, head of investment analysis at AJ Bell.

“Despite the UK starting to tighten monetary policy first, interest rates are now higher in the US.”

The US Federal Reserve on Wednesday announced the most aggressive interest rate increase in nearly 30 years —  in a battle to drive down surging consumer prices.

The Fed’s rate hike of 0.75 percentage points came after US inflation rocketed to 8.6 percent in May, the highest level in more than four decades.

UK inflation currently stands at nine percent, last seen 40 years ago.

Prices are soaring worldwide as economies reopen from pandemic lockdowns and amid the Ukraine war that is pushing already high energy costs skyward.

The BoE’s latest rate hike was in response to “continuing signs of robust cost and price pressures… and the risk that those pressures become more persistent”, according to minutes of the UK meeting.

A minority of BoE policymakers had voted for an increase to 1.5 percent.

London’s benchmark FTSE 100 index closed down 3.1 percent in a global sell-off for equities as fears mount over a possible recession.

“It is a bloodbath for stock markets as recession fears have prompted traders to cut and run,” said David Madden, market analyst at Equiti Capital. 

– ‘Slow poison’ –

The BoE on Thursday forecast the UK economy to contract by 0.3 percent in the second quarter that ends on June 30 — and after growing in the first three months of the year.

A recession is defined as two consecutive quarters of negative growth.

“Inflation risks being a slow poison for the economy, so the Bank of England is trying to take an antidote now by raising interest rates,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“However, it can only take a small dose at a time given the ailing nature of the economy… with more hikes to follow.”

Higher interest rates, while boosting returns for savers, ramp up loan repayments for businesses and households.

British economic output declined for a second month in a row in April, weighed down by rocketing prices that are causing a cost-of-living crisis for millions of Britons, while increasing the risk of a UK recession this year.

Data this week also revealed the first rise in the UK unemployment rate since the end of 2020 — although at 3.8 percent it remains at a near 50-year low point thanks to the highest amount of job vacancies on record.

At the same time, the value of average UK wages is falling at the fastest pace in more than a decade.

Fearing fallout from surging inflation, the BoE began to raise its key interest rate in December, from a record-low level of 0.1 percent.

Almost two years earlier, as the Covid-19 pandemic began to take hold, the BoE slashed the rate to just above zero and decided to pump massive sums of new cash into the economy.

In the neighbouring eurozone, the European Central Bank is next month set to raise interest rates for the first time in more than a decade.

Switzerland’s central bank hiked its rate Thursday for the first time in 15 years.

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The United States on Thursday imposed sanctions on Iranian petrochemical producers as well as Chinese and Indian brokers, expanding pressure amid a deadlock in negotiations on restoring a nuclear deal.

President Joe Biden’s administration said that it still remained committed to diplomacy with Iran to restore a 2015 agreement on curbing its nuclear program.

“Absent a deal, we will continue to use our sanctions authorities to limit exports of petroleum, petroleum products and petrochemical products from Iran,” said Brian Nelson, senior Treasury Department official.

The Treasury Department said it was imposing sanctions on a network of Iranian petrochemical firms including alleged front companies in China and the United Arab Emirates for Iran’s state-owned company and Triliance, a Hong Kong-based company already under US sanctions for its dealing with Iran.

It also took action against China-based broker Jeff Gao and Indian national Mohammad Shaheed Ruknooddin Bhore for allegedly managing business for Triliance.

The United States has sought to prevent any nation from buying Iranian oil since 2018 after then president Donald Trump walked away from a negotiated agreement, in which Iran drastically scaled back its nuclear program in return for promises of sanctions relief.

China has remained the top buyer of Iranian oil while India reluctantly ended imports under US pressure.

Biden has sought to restore the nuclear deal, saying that the United States would ease sanctions if Iran returns to compliance, but his chief negotiator recently said it was more likely than not that the diplomacy will fail.

Iran has insisted on the United States removing a Trump-era designation of its powerful Revolutionary Guards as a terrorist organization, a move that Biden has rejected as peripheral to discussions on the nuclear deal.

The board of directors of US video game publisher Activision Blizzard said Thursday that there was no evidence to suggest that management had ignored or minimized accusations of sexual harassment. 

The firm behind hits like Candy Crush and Call of Duty, which Microsoft is acquiring in a blockbuster $69 billion deal, has been roiled by lawsuits and workers’ allegations.   

Its CEO Bobby Kotick has apologized on behalf of the group and implemented a “zero tolerance” policy, while dozens of employees have been sanctioned or fired.

But according to the Wall Street Journal, the executive knew about reports of harassment for several years and sought to keep the incidents quiet.  

In a filing with US market regulators, the firm acknowledged Thursday the existence of cases of gender-based harassment.  

“The board and its external advisors have determined that there is no evidence to suggest that Activision Blizzard senior executives ever intentionally ignored or attempted to downplay the instances of gender harassment that occurred and were reported,” the document said. 

The firm and its advisors have “not unearthed any evidence, directly or indirectly, suggesting any attempt by any senior executive or employee to conceal information from the board.” 

Activision also hired Gilbert Casellas, a former chair of US discrimination watchdog Equal Employment Opportunity Commission (EEOC), for a review.  

According to the company, he concluded that there was no widespread harassment, recurring pattern or practices of harassment at Activision Blizzard or any of its subsidiaries. 

Still, the company reached an agreement last year with the EEOC to create an $18 million compensation fund for harassment victims.   

Activision also faces a case brought by California’s rights watchdog, which launched a lawsuit last year alleging sexual harassment and discrimination at the company. 

Russian energy giant Gazprom on Thursday defended gas cuts to Europe as prices soared and tensions raged between Russia and the West over Ukraine.

Gazprom CEO Alexei Miller said that Moscow will play by its own rules after cutting daily gas supplies to Germany and Italy.

“Our product, our rules. We don’t play by rules we didn’t create,” Miller said during a panel discussion at the Saint Petersburg International Economic Forum in Russia’s second city.

Earlier this week, Gazprom slashed its natural gas deliveries via the Nord Stream pipeline, after saying Germany’s Siemens had delayed the repair work of compressor units at the Portovaya compression station. 

“For now, there is no way to solve the problem that arose with the compressor station,” Miller said.

“Siemens is still silent, trying to find a solution.”

Italian energy giant Eni also reported problems, saying it will receive only 65 percent of the gas requested Thursday from Gazprom.

Gazprom has said exports to countries that did not belong to the former Soviet Union were down 28.9 percent between January 1 and June 15 compared to the same period last year.

“Of course, Gazprom is reducing the volume of gas supplies to Europe,” Miller said, pointing out that the prices have increased several-fold.

“If I say we are not offended by anyone, then I am not pretending,” Miller said. 

Gas prices continued to soar on Thursday, galvanized by a sharp cut in supply from Russia. Europe’s reference natural gas price, Dutch TTF, reached almost 150 euros ($158) per megawatt/hour before falling to 134 euros in the afternoon. 

Moscow has lost several European gas clients after it demanded that all “unfriendly” countries pay for Russian natural gas in rubles in response to a barrage of Western sanctions over Russia’s military intervention in Ukraine.

Poland, Bulgaria, Finland and the Netherlands have had their natural gas deliveries suspended over refusing to pay in rubles. 

The Nord Stream pipeline was commissioned in 2012 and delivers gas from northwestern Russia to Germany via the Baltic Sea.  

The launch of the Nord Stream 2 pipeline that was set to double Russian gas deliveries to Germany was halted in response to Moscow’s military campaign in Ukraine. 

“Nord Stream 2 is under pressure and gas could be supplied to Germany even today via it. But it has not been put in operation because it is not certified,” Miller said.

EU countries have scrambled to reduce their dependency on Russian energy but are divided about imposing a natural gas embargo as several member states are heavily reliant on Moscow’s energy supplies.