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On April 30th, the Bank of England, in sync with the Federal Reserve, kept its key interest rate unchanged and hinted at a possible increase in borrowing costs soon to curb soaring inflation triggered by the Middle East conflict. The war with Iran has driven up oil and gas prices, and despite the suspension of military operations, the Strait of Hormuz remains closed, keeping energy prices persistently high. Like other central banks, the Bank of England has adopted a wait-and-see approach to the surge in inflation driven by rising energy prices, with the fate of the Strait being key to its final policy decision. With little progress on reopening the Strait, the Bank of England signaled that the waiting period may be coming to an end. The Bank of England stated, "There is a risk of a substantial second-round effect on price and wage setting, which policy needs to resist." Chief Economist Peale, one of the nine members of the Monetary Policy Committee, voted to raise the key interest rate to 4%. Peale stated, "Uncertainty is unlikely to dissipate anytime soon, but it is clear that rising energy prices have posed an inflationary shock to the UK economy."The market maintains its bets on a Bank of England rate hike, expecting a 73 basis point increase in 2026.The Bank of England stated that inflation could have a substantial second round of impact on wages and price settings, which policy needs to control.Bank of England Governor Bailey: Given the UK economic situation and uncertainties in the Middle East, it is reasonable to keep interest rates unchanged at 3.75%.Bank of England: CPI may rise even higher this year as the effects of rising energy prices become more apparent.

EU May Revise Green Objectives to Abandon Russian Energy

Charlie Brooks

Apr 11, 2022 09:36

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Following Russia's invasion of Ukraine in February, the European Commission suggested that Europe reduce its reliance on Russian gas supplies by two-thirds this year and phase them out entirely by 2027.


In May, the Commission is expected to present a "Repower EU" proposal outlining how the union might phase out Russian fossil fuels.


"What we're going to do over the next few weeks is work on what I'm calling the Repower EU program, which includes accelerating the energy transition. Thus, in that framework, we may reconsider our objectives "Timmermans said this to journalists on a visit to Cairo.


Timmermans declined to provide specific numbers for potential revised standards, but said such an adjustment would result in a "greater proportion of renewable energy in 2030."


By 2030, the EU's current plans call for renewable energy to account for 40% of final consumption.


Egypt, which is hosting the COP27 climate conference in November and re-exports Israeli gas from LNG facilities on its Mediterranean coast, might assist the EU in diversifying its gas supplies, Timmermans said.


"If we can get more LNG in the area - and we'll have to wait and see how much Israel makes available - that would be a viable option," he added.


"At its heart, what I'm presenting is a long-term strategic collaboration that begins with LNG and swiftly expands to include renewable energy, particularly hydrogen," he continued.

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