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BoE eyes longest recession since 1930s




The United Kingdom’s central bank hiked its key interest rate by a whopping 0.75 percent on Thursday in its latest attempt to tame the rampant inflation that has contributed to the country’s worst cost-of-living crisis for decades.

The Bank of England’s decision to push its interest rate up from 2.25 percent to 3 percent was aimed at encouraging people to save instead of spend, in order to edge inflation back down from its current 10.1 percent toward the bank’s 2 percent target.

The rise was the largest the UK had seen since 1989 and takes the interest rate to its highest level since 2008.

The bank also said it believes the UK will soon enter its longest recession since the depression of the 1930s, with economic contraction likely to continue for two years and with unemployment set to double.

Sky News said analysts at Deutsche Bank said the UK’s economy is entering “a deeper and more prolonged recession” than previously expected.

The BBC quoted the UK’s finance minister, Chancellor of the Exchequer Jeremy Hunt, as saying the bank had no choice but to act.

“Inflation is the enemy and is weighing heavily on families, pensioners, and businesses across the country,” he said.

The bank’s nine-member monetary policy committee has now delivered eight back-to-back interest rate hikes since December, when the rate was only 0.1 percent.

Karen Ward, chief strategist at JP Morgan Asset Management and a member of the Treasury’s economic advisory council, told The Times newspaper a smaller interest rate hike would have triggered a new round of market selling.

Experts said the rise will further calm financial markets in the wake of the disastrous mini-budget former chancellor of the exchequer Kwasi Kwarteng unveiled in September.

But critics said the rate rise will push up the cost of mortgages by several hundred pounds and cause real hardship.

Clare Moriarty, head of the Citizens Advice Bureau, said on Radio 4’s Today program: “Mortgage lenders do have to consider how they can help people in financial difficulties. This might be by payment deferrals, or removing additional fees and charges.”

She said the bureau, which offers free legal advice, is urging people in difficulty to talk to their lender.

The rate hike will also push up the cost of credit card debt, car loans, lines of credit, and other loans.

Rachel Reeves, the opposition Labour Party’s spokesperson on the economy, said it means “families with already stretched budgets will be hit by higher mortgage payments” and that there will be “higher financing costs for businesses”.

“For many firms who have had a tough couple of years, this will mean desperately difficult decisions about whether to carry on,” she added.

The value of the pound fell immediately after the Bank of England’s announcement, by 1.4 percent, to 1.123, against the US dollar, and by 0.8 percent against the euro.

But the UK is not alone in making significant recent rate hikes. On Wednesday, the United States’ Federal Reserve raised its rate by 0.75 percent. Last week, the European Central Bank pushed its interest rate up by 0.75 percent and said more rises will follow.

Source(s): China Daily Global


Finance Minister: GDP would have been at MVR 140B if not for the pandemic





Finance Minister Ibrahim Ameer, on Wednesday, stated that Maldives’ Gross Domestic Product (GDP), if not for the COVID-19 pandemic, would have been at MVR 140 billion by the end of this year.

Speaking at a campaign rally of President Ibrahim Mohamed Solih held at Ameer’s birth island, GDh. Gadhdhoo last night, the minister said Maldives’ economy was improving at a high speed ahead of the pandemic.

He detailed that only USD 162 million was in the state’s usable reserve when the current administration took office in 2018, which was raised USD 316 million in just two years.

Nevertheless, Ameer stressed that the nation’s GDP dropped by 33 percent due to the pandemic, citing the Maldivian economy would have been at much better levels by the end of this year, if the pandemic had not taken place.

Ameer forecasted the following numbers with respect to the economy by the end of this term, if not for the pandemic.

GDP – MVR 140 billion
Usable reserve – USD 500 million
Tourist arrivals – Three million per year
Nevertheless, Ameer said the Maldivian economy was in a better condition compared to before, even with the difficulties faced due to the pandemic.

“Even with the pandemic, the usable reserve stood at approximately USD 177 million when we concluded 2020 amid the pandemic; an increase from the USD 162 million it stood at by the end of 2018,” he said.

The minister stressed that the government had incurred huge expenses during the pandemic to provide income support, frontline allowance and financial assistance to small and medium enterprises.

He added that the government undertook these tasks while faring through the biggest low the Maldives and the world’s economy have ever experienced.

Minister Ameer said the government, despite a multitude of difficulties, carried out a great number of infrastructure development projects – which would aid in doubling the economy in the next term.

Statistics show that Maldives’ usable reserve stood at USD 594 million at the end of last month. USD 238 million has been deducted from the reserve between last year’s December and July.

Maldives’ GDP improved by 13 percent last year, while so far this year, it has been at 9 percent.


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ECB rate hikes might knock 3.8 pct off euro area economy: analysis





Given that governments in eurozone have or will opt out of the supportive measures which were put into place in the face of the surging energy prices over a year ago, the regional economy can contract up to 5 percent in 2024, a Bloomberg analysis noted.

FRANKFURT, Aug. 7 (Xinhua) — Aggressive rate hikes by the European Central Bank (ECB) can inflict an adverse impact on the economy of the euro area, and will trim 3.8 percent off from its economic output in 2024, a Bloomberg analysis published on Monday said.

The analysis said that the combination of high interest rates and limited government capacity to stimulate development poses a potential constraint on the economic growth of the euro area.

Given that governments in the euro area have or will opt out of the supportive measures which were put into place in the face of the surging energy prices over a year ago, the euro area economy can contract up to 5 percent in 2024, the analysis noted.

The ECB has lifted key interest rates by a total of 425 basis points since last July in a bid to bring down inflation, which is hovering well above its target of 2 percent.

The central bank has refrained from pre-announcing another hike for its next rate-setting meeting, insisting that interest rates will remain its primary tool in the fight against inflation.

The ECB considered the euro area economy to be weak in the short run but said it would pick up momentum in the long run. The central bank will publish its latest edition of projections for inflation as well as economic growth in the euro area in September.

Source(s): Xinhua

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BML posts Q2 net profit of over MVR 550M





Bank of Maldives (BML) has posted a net profit after tax of over MVR 550 million for the second quarter of the year.

The national bank’s Q2 financial results, released on Monday, shows the bank generated a revenue of MVR 1.06 billion.

The bank generated an operating profit of MVR 678 million – up 15 percent compared to Q2 2022.

BML posted a net profit after tax of MVR 552 million – up 55 percent compared to last year.

The bank attributed the increase to solid performances across all core business lines.

Despite the higher profits, the bank noted that capital adequacy and liquidity ratios are significantly higher than regulatory requirements.

During Q2, BML introduced its digital banking assistant, “Aaya”, as part of its commitment to enhance customer experience; introduced Two Factor Authentication (2FA) for internet and mobile banking logins, and a self-service ‘Kill Switch’ to disable access to internet banking and cards in emergencies.

BML’s CEO and Managing Director Karl Stumke said he was pleased with the results.

“We are pleased with the positive first half results which gives us the financial platform to continue to invest in the communities we serve. We will work hard to continue the positive momentum throughout the rest of the year,” he said.

In May, BML partnered with American Express to launch the year-long destination campaign ‘Experience Maldives’ offering unique, authentic experiences for American Express Card members.

The bank also opened new Self-Service Banking ATM centers in Maafaru and Miladhoo.

Q2 also saw the bank hold its Annual General Meeting, during which shareholders approved a total dividend payout of MVR 215 million, with MVR 40 per share.

BML boats a nationwide network of 38 branches across all 20 atolls, 87 self-service banking centers, 143 ATMs, over 200 agents, and a full suite of digital banking services.

BML states it remains committed to supporting individuals, businesses and communities across Maldives.


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