Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The Bank of England has a lot on its plate right now. The economy is emerging from one of its worst slumps ever, a no-deal Brexit could be looming, and inflation has slumped to near zero.
And at noon today, the BoE will reveal its latest monetary policy decision, and update us on its assessment of the economic outlook. It’s likely to be a sobering read, with unemployment expected to nearly double this year.
The Bank could well drop some loud hints that it will launch more stimulus measures soon, especially if Brexit fears grip the economy tighter.
Jim Reid of Deutsche Bank predicts the Bank of England will leave interest rates and its QE programme on hold today, but may act before Christmas:
Our base case is that there’ll be a further £60bn top-up to the QE program in December, though risks are rising that this might be announced slightly earlier at the November meeting. The meeting comes against the backdrop of rising Brexit uncertainty, which will only serve to heighten uncertainty and weaken confidence.
Brexit wasn’t mentioned once in the minutes of the August meeting, but it’ll be interesting to see if this change ….
America’s central bank has already had its say. Last night, the Uederal Reserve said it would keep interest rates at record lows until at least 2023, to ensure that inflation was on track to overshoot its target.
As Fed Chair Jerome Powell put it:
Effectively what we are saying is that rates will remain highly accommodative until the economy is far along in its recovery,
The Fed also raised its growth and unemployment forecasts, suggesting confidence that the economy was healing. It now only expects US GDP to shrink by 3.7% this year, up from a 6.5% contraction before. Unemployment is now seen at 7.6% by the end of the year, down from 9.3%.
You might expect this pledge of even more loose monetary policy to cheer investors and lift risky assets, but US stocks actually closed lower last night, with the Nasdaq losing 1.25%.
Investors were alarmed that Powell warned the US rebound could be at risk without more government spending — a nudge to Congress to end their disagreements over stimulus packages.
Fiona Cincotta of City Index explains:
Stocks sold off and the US Dollar rose following the Fed’s announcement in and risk off move as the market portrayed its frustration at the Fed’s reluctance to offer any more stimulus.
That knocked stocks in Asia, and european equities are also facing losses at the open. The FTSE 100 predicted to fall around 1% – back to the 6,000 point mark.
We’ll be tracking all the action through the day, including the latest US unemployment and housing data.
- Noon BST: Bank of England interest rate decision
- 1.30pm BST: US weekly jobless figures
- 1.30pm BST: US mortgage approvals and housing starts