Bitcoin vs Big Banks?

UK Bank Interest Rates 2021-2022

Markets are now prepared for up to three Bank of England rate increases next year to prevent inflation from spiraling out of control when the economy recovers faster than anticipated in the second quarter. Investors had expected UK interest rates to rise in February next year after the Bank signaled growing concerns about rising inflation, but the outlook for 2021 has been raised to an outside possibility. 

The Bank of England could raise borrowing costs before the end of 2022, but is convinced that there is every chance of doing so after a solid economic recovery from the coronavirus pandemic (COVID-19), which will be accompanied by higher inflation in London on 29 July 2021, a Reuters poll showed. Inflation pressures are building in the UK, making a rate rise more likely later this year, the central bank chief has warned. The Bank left its key interest rate at a record low of 0.1% unchanged and its bond-buying program unchanged at £89.5billion at its September 2021 meeting.

In terms of market prices, the BoE base rate rose to 0.25% in December 2021. With inflationary pressures growing, the Bank of England will be forced to raise the interest rates in 2022, according to Andrew Bailey, the Bank Governor. Economists predict inflation will reach 6% in April 2022, and market prices for two more rate hikes in 2022 will lift the BoE’s benchmark rate to 1% by the end of the year.

Last week the Bank Monetary Policy Committee ( MPC) voted to maintain interest rates at 0.1% despite concerns that economic growth could slow in the first half of the year. A senior MPC member said inflation could prove stubborn, increasing the likelihood that some members will vote to hike rates before the end of 2021. If inflation continues to rise – and that means goods and services become more expensive – the MPC could vote next year to raise rates sooner than anticipated, said Sarah Coles, personal finance analyst at Hargreaves Lansdown. 

Bank of England policymakers voted to maintain the key interest rate at a record low of 0.1% and to stick to their target of £875 billion (€1.2 trillion) for asset purchases. The Monetary Policy Committee ( MPC ) of the Bank kept the key interest rate at its record low of 0.10% at its meeting at the end of September. This rate has been held since March 2020. On 23 September, the MPC announced that it would re-end interest rates at 0.0 percent and leave the total volume of its bond-buying program, called quantitative easing (QE), at £895bn unchanged until the end of 2021.

According to a September 6-9 survey, banks’ “interest rates rose from their current record low of 0.10% to 0.25% in the fourth quarter and through the end of 2022. The panel’s Focuseconomics consensus forecast put the rate at 0.0% by 2021 and -0.18% by 2022. In the UK the repo rate was expected to increase between May 2022 and December 2022 by 25 basis points to 50 basis points, compared with August 2022 and February 2024 at the time of the last committee meeting. 

Investors were surprised by the unanimous agreement of the nine-member monetary policy committee that rising interest rates are possible before the scheduled end of the current bond-buying program at the end of 2022. Raising interest rates on Threadneedle Street would mean that the central bank would act faster than its international counterparts, particularly the US Federal Reserve and the European Central Bank, which have already raised rates. That would put the BoE ahead of the Fed, which is not expected to raise interest rates until 2023. The Fed is expected to announce plans to scale back its bond purchases later this month, a separate Reuters poll showed. 

On November 4th, Threadneedle Street deposit-rate setters faced a problem they have been considering for months: rising inflation in the short term when the pandemic breaks out, turning the economy upside down and disrupting global supply chains, but the ongoing problem of containing rate increases. Given low real yields and the expectation that monetary policy will remain accommodative, the central bank sees a temporary rise in inflation to support risky asset prices. Markets expect the first move to be 15 basis points in February 2022 and a further 25 basis point rate hike in the second half of next year, E & E. analysts said.

US economic growth rose to 6.7% in the second quarter of 2021. This, in turn, triggered a rise in the mortgage rates and if growth continues in this direction, inflation is forecast to reach 4.2% by the end of the year and remain high. If the cost of household bills, especially food, rises faster than inflation (3.2%), it is likely to have a domino effect on mortgage rates, meaning that they could soar in 2022. If you plan to fix your mortgage rate before rates rise, mortgage rules prevent you from getting stuck on your existing deal, so your mortgage repayments will rise in line with the bank’s “base rate, not at your lender’s whim.

On the other hand, house prices in some parts of the country have risen by up to 60% since the Covid incident as people spend more time at home. There is speculation that this could lead to rising mortgage rates in 2022 as the UK economy recovers. Samuel Tomb, the chief economist at consultancy Pantheon Macroeconomics, said Bailey’s gloomy comments on the economy sparked his inflation worries and left the door open for interest rates to rise. 

UK Cryptocurrency Forecast 2022?

For example, when the economy seems to be growing too fast and prices of goods and services rise so quickly they become unaffordable, central banks raise interest rates, making borrowing expensive for borrowers. An official digital currency could facilitate attempts by central banks to impose negative interest rates so that commercial banks would have to pay the central bank to accept their money. With a digital central bank currency, the public would lose the alternative cash zero-interest and nations could use their official digital currencies to push up interest rates.

With a digital currency, savers would have an account with their central bank branch and not with their retail bank – which would represent a huge paradigm shift that would allow central banks to create and destroy money directly in their citizens -‘cash accounts and bypass the clunky and disjointed bureaucratic system and processes that have seen us in this year as governments struggle to enforce incentive controls on individuals and businesses. 

The fact is that the mass adoption of cryptocurrencies is more likely to be achieved through the integration of blockchain into existing financial systems and interoperability between cryptoservices and banking services.

Centralized digital currencies do not pose a direct threat to Bitcoin, as many in the blockchain and cryptoindustry believe. There is an argument that supporters of the Austrian School of Economics could make to support the introduction of a peer-to-peer cryptocurrency of Bitcoin – style that eliminates the central banks and their complex systems. Emerging economies without central banks have among their top priorities financial inclusion, including the informal sector, the fight against financial crime, and support for the digitalization of their economies. 

In his recent column, Nouriel Roubini writes that central banks could issue their own digital currencies but that could destroy cryptocurrencies such as Bitcoin. Central banks “digital currencies (CBDCs) may prove to be the most revolutionary financial innovation since the introduction of paper money. The world’s central banks have started to talk about the idea of CBDCs and even the International Monetary Fund and its Managing Director Christine Lagarde have been talking about the pros and cons of the idea. 

At the same time, digital payments systems such as PayPal, Venmo and others offer attractive alternatives to traditional commercial banks in the West, Alipay in China, M-Pesa in Kenya and Paytm in India. Bitcoins, Ethereum, and other crypto-digital currencies issued by central banks could serve the traditional function of money. A commercial bank’s assets, which can be accessed through its website, would be a digital dollar, not a digital currency of the kind Cukierman predicted that central banks would begin to spend.

In other countries, banks are planning to introduce or test their own digital currencies, including Uruguay, Sweden, Thailand and China. Just as governments now validate money with Fiat (the US dollar is legal tender, because they have declared it so), such nations could introduce a parallel replacement for central banks with digital currencies instead of Fiat. 

The Bank for International Settlements estimates that a quarter of the world’s population will live in a country with a digital currency within three years. It also means that most cryptocurrencies, including bitcoin and ether, are going to be worthless within a decade and replaced by digital currencies supported by central banks, the US dollar, the euro, the yuan, or stable coins with real assets such as the dollar, the euro, yuan, gold and other investable assets. 

It is clear that the entire shadow monetary and shadow banking system has emerged and is threatening to flourish again. Considering that the cash has been used by central banks for centuries (every little less than a few centuries in the case of Trivium) the Riksbank is not the first, but it is the pioneering innovator in this field that made the fastest deviation from the status quo. 

The idea of a competitive currency may seem strange nowadays, but there have been many phases throughout history in which banks have issued their own currencies to compete for their use. Supporters of the cryptocurrency believe that it is necessary to push for something else that, given the longevity and scarcity, mimics the attributes of gold-backed currencies, and that the current system is intelligent and secure enough to prevent central banks from issuing at will. Going forward, we must understand that cryptocurrencies are declaring war on the traditional banking and financial system. 

Other known failures of the current financial and monetary system are bank failures, bailouts, lack of transparency, inefficiencies and excessive fees, which have made a number of bank managers and regulators very rich. The real role of banks in the digital currency or cryptocurrency world is to store and exchange trustworthy assets. 

CBDCs would radically alter this arrangement by allowing individuals to make transactions outside the central banks, reducing the need for cash, traditional bank accounts and digital payment services. Instead, they would replace the private digital payment systems now associated with traditional bank accounts and cryptocurrencies. 

Given that metal coins are expensive to produce and cost far more than their face value, it is likely that not all central banks will use digital currencies as their profit a day. You may notice that the central banks had Facebook splurged when they attempted to propose the introduction of its own currency, the Libra, supported by a basket of fiat currencies such as the Euro and the Dollar. In the wake of the 2008 financial crisis, a person named Satoshi Nakamoto created a complete and revealing computer program that cryptographers say is an exquisite work, in which he wrote a series of essays explaining the moral reasons for a new type of money and why governments and central banks are corrupt and unfit to regulate money.