The Bank of England (BoE), Silicon Valley Bank and Credit Suisse Group AG have made an official assessment of the UK’s financial conditions for the first time since the financial sector crisis.
The BOE warned that the next boom in financial markets could be by corporate lending, the Fiscal Policy Committee’s report released on Wednesday.
“Higher-yield bonds are particularly vulnerable to interest rate hikes on riskier corporate borrowing, including leveraged loans and private credit,” the report said. Increasing geopolitical risks increase the clarification of financial vulnerabilities.
Emphasizing that the banking system in the UK has good capital and strong liquidity, the report stated that risks in non-bank finance, hedge funds and private credit markets have increased and these may pose risks to the financial stability of the UK.
BoE raises interest rates to 14-year high
BoE, with its decision at its last meeting on March 23, increased the policy rate by 25 basis points from 4 percent to 4.25 percent. The interest rate increase was recorded as the highest level in the last 14 years.
In the minutes of the bank, it was stated that the inflation in the country rose to 10.4 percent in February of this year and was realized 0.6 points above the forecast in the previous meeting of the board, and it was reported that the bank still expected the inflation to continue to decline significantly in the second quarter of 2023.