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| Bank of England warns Brexit uncertainty is hurting the economy – business live | Bank of England warns Brexit uncertainty is hurting the economy – business live |
| (about 1 hour later) | |
| 3.03pm BST | |
| 15:03 | |
| Britain leaving the EU would not have a direct effect on the Russian economy, said the country’s central bank governor Elvira Nabiullina, repeating comments she made a week or so ago. | |
| In an interview with CNBC (transcript here ) ahead of her appearance at the St. Petersburg International Economic Forum, she said foreign investors’ perception of the Russian economy has improved. | |
| And after last week’s rate cut she said the central bank might reduce its key rate further. | |
| 2.58pm BST | |
| 14:58 | |
| Wall Street opens lower | |
| In line with other global markets, US shares have come under pressure on fears of Brexit and the Federal Reserve’s caution about the global economy. | |
| The Dow Jones Industrial Average is down 130 points or 0.7%, while the S&P 500 opened 0.38% lower and Nasdaq down 0.5%. | |
| The US opening fall has seen the declines in other markets accelerate, with the FTSE 100 now down 62 points or 1%. Germany’s Dax is down 1.3% and France’s Cac has lost 0.95%. | |
| 1.55pm BST | 1.55pm BST |
| 13:55 | 13:55 |
| Mixed US data | Mixed US data |
| Meanwhile there have been some mixed economic numbers from the US. | Meanwhile there have been some mixed economic numbers from the US. |
| Consumer price inflation rose 0.2%% in May, down on the April figure of 0.4%. Analysts had expected a rise of 0.3%. Core inflation was unchanged at +0.2% | Consumer price inflation rose 0.2%% in May, down on the April figure of 0.4%. Analysts had expected a rise of 0.3%. Core inflation was unchanged at +0.2% |
| Weekly jobless claims jumped to 277,000, compared to expectations of a 267,000 increase, while the Philadelphia Federal Reserve business conditions index came in at 4.7 compared to expectations of a flat performance. David Morrison, senior market strategist at Spread Co, said: | Weekly jobless claims jumped to 277,000, compared to expectations of a 267,000 increase, while the Philadelphia Federal Reserve business conditions index came in at 4.7 compared to expectations of a flat performance. David Morrison, senior market strategist at Spread Co, said: |
| The dollar fell in the immediate aftermath of the releases while stock index futures also declined. | The dollar fell in the immediate aftermath of the releases while stock index futures also declined. |
| Referendum or no referendum, there’s a growing feeling that the Fed has lost the plot when it comes to monetary policy. The US central bank switches from dovish to hawkish and back again with worrying regularity and has thrown the notion of “data dependence” out of the window. It is becoming obvious to an increasing number of investors that the Fed cannot bring itself to raise rates, yet is taking all measures to attempt to hide this fact from the market. It’s in a corner where hiking raises the prospect of a violent stock market sell-off, whereas a failure to tighten monetary policy suggests deep-rooted economic problems. | Referendum or no referendum, there’s a growing feeling that the Fed has lost the plot when it comes to monetary policy. The US central bank switches from dovish to hawkish and back again with worrying regularity and has thrown the notion of “data dependence” out of the window. It is becoming obvious to an increasing number of investors that the Fed cannot bring itself to raise rates, yet is taking all measures to attempt to hide this fact from the market. It’s in a corner where hiking raises the prospect of a violent stock market sell-off, whereas a failure to tighten monetary policy suggests deep-rooted economic problems. |
| Updated | Updated |
| at 1.56pm BST | at 1.56pm BST |
| 1.47pm BST | 1.47pm BST |
| 13:47 | 13:47 |
| FTSE 100 falls to lowest level since mid-February | FTSE 100 falls to lowest level since mid-February |
| The continuing uncertainty over a possible Brexit, with polls continuing to show the Leave campaign on the front foot, has sent London’s leading shares to their lowest level since the middle of February. | The continuing uncertainty over a possible Brexit, with polls continuing to show the Leave campaign on the front foot, has sent London’s leading shares to their lowest level since the middle of February. |
| The FTSE 100 is currently down 0.9% at 5911, a low not seen since February 17. As well as Brexit, the cautious comments from the US Federal Reserve about the global economy are also having an impact. | The FTSE 100 is currently down 0.9% at 5911, a low not seen since February 17. As well as Brexit, the cautious comments from the US Federal Reserve about the global economy are also having an impact. |
| Mining shares are among the main fallers, with copper prices down more than 2% and oil 1.5% lower. However precious metal specialists such as Randgold Resources and Fresnillo are on the rise, as investors seek out gold and silver as havens for their cash. | Mining shares are among the main fallers, with copper prices down more than 2% and oil 1.5% lower. However precious metal specialists such as Randgold Resources and Fresnillo are on the rise, as investors seek out gold and silver as havens for their cash. |
| Banks are also under pressure on fears they would be hard hit by a Brexit decision. | Banks are also under pressure on fears they would be hard hit by a Brexit decision. |
| On the foreign exchange markets the pound is down around a cent at $1.41, a near two month low. | On the foreign exchange markets the pound is down around a cent at $1.41, a near two month low. |
| 1.19pm BST | 1.19pm BST |
| 13:19 | 13:19 |
| Still on interest rates, economist Sam Alderson at the Centre for Economics and Business Research said: | Still on interest rates, economist Sam Alderson at the Centre for Economics and Business Research said: |
| In the absence of a vote to leave later this month, interest rates look unlikely to change for some time to come. Given a generally softening domestic economy and relatively gradual recovery in inflation, we wouldn’t expect the MPC to raise rates until the middle of 2017 at the earliest. However, the currency impact of a leave vote is likely to have a notable impact on the outlook for inflation. This in turn will clearly affect the Bank’s monetary policy stance in the months that follow. | In the absence of a vote to leave later this month, interest rates look unlikely to change for some time to come. Given a generally softening domestic economy and relatively gradual recovery in inflation, we wouldn’t expect the MPC to raise rates until the middle of 2017 at the earliest. However, the currency impact of a leave vote is likely to have a notable impact on the outlook for inflation. This in turn will clearly affect the Bank’s monetary policy stance in the months that follow. |
| 1.16pm BST | 1.16pm BST |
| 13:16 | 13:16 |
| UK interest rates would be cut close to zero in the event of a vote to leave the EU, says RBC Europe’s senior UK economist Sam Hill: | UK interest rates would be cut close to zero in the event of a vote to leave the EU, says RBC Europe’s senior UK economist Sam Hill: |
| The minutes continue to be non-committal on the direction of a change in monetary policy following a Leave vote even though the Committee acknowledge it could “materially alter the outlook”. Although the MPC only go as far as saying the direction of any move in policy “will depend on the relative magnitudes of the demand, supply and exchange rate effects” we are of the view that Bank Rate would be cut “towards zero” in the event of Brexit. Any short-term spike in inflation following a decline in the exchange rate we would expect to give way to downward pressure on inflation in the medium term – which is the MPC’s policy-relevant horizon – as weak demand is likely to weigh on output. | The minutes continue to be non-committal on the direction of a change in monetary policy following a Leave vote even though the Committee acknowledge it could “materially alter the outlook”. Although the MPC only go as far as saying the direction of any move in policy “will depend on the relative magnitudes of the demand, supply and exchange rate effects” we are of the view that Bank Rate would be cut “towards zero” in the event of Brexit. Any short-term spike in inflation following a decline in the exchange rate we would expect to give way to downward pressure on inflation in the medium term – which is the MPC’s policy-relevant horizon – as weak demand is likely to weigh on output. |
| The one change [in the minutes] which was discernable was an increased emphasis on the international implications. Firstly on referendum uncertainty (“The outcome of the referendum continued to be the largest immediate risk facing UK financial markets, and possibly global financial markets.”) and secondly on the event of a Brexit outcome (“Through financial market and confidence channels, there were also risks of adverse spillovers to the global economy.”). There was also reference to a further fall in sterling “perhaps sharply” in a Leave scenario but in the grand scheme of things these minutes don’t add much to what the MPC has already said on the EU referendum. | The one change [in the minutes] which was discernable was an increased emphasis on the international implications. Firstly on referendum uncertainty (“The outcome of the referendum continued to be the largest immediate risk facing UK financial markets, and possibly global financial markets.”) and secondly on the event of a Brexit outcome (“Through financial market and confidence channels, there were also risks of adverse spillovers to the global economy.”). There was also reference to a further fall in sterling “perhaps sharply” in a Leave scenario but in the grand scheme of things these minutes don’t add much to what the MPC has already said on the EU referendum. |
| The outlook for policy in the Remain scenario – effectively the scenario on which the May Inflation Report was conditioned – isn’t likely to be presented with greater clarity until August at the earliest. However, at this stage news since May “had done relatively little to change the MPC’s assessment of the economic outlook”. The Committee has been clear that data are difficult to interpret due to potential referendum effects. The same will be true until such time as it is thought any such effects have unwound after a Remain vote. We concluded last week... that any Remain rebound in economic activity may be underwhelming. | The outlook for policy in the Remain scenario – effectively the scenario on which the May Inflation Report was conditioned – isn’t likely to be presented with greater clarity until August at the earliest. However, at this stage news since May “had done relatively little to change the MPC’s assessment of the economic outlook”. The Committee has been clear that data are difficult to interpret due to potential referendum effects. The same will be true until such time as it is thought any such effects have unwound after a Remain vote. We concluded last week... that any Remain rebound in economic activity may be underwhelming. |
| So, whilst in that scenario our central case is for a 25 basis point Bank Rate hike in February 2017, the skew of risks is now clearly to a more dovish profile rather than a tightening in 2016. | So, whilst in that scenario our central case is for a 25 basis point Bank Rate hike in February 2017, the skew of risks is now clearly to a more dovish profile rather than a tightening in 2016. |
| 1.08pm BST | 1.08pm BST |
| 13:08 | 13:08 |
| Katie Allen | Katie Allen |
| Here’s our report on the Bank of England comments: | Here’s our report on the Bank of England comments: |
| The Bank of England has issued a fresh warning that a vote to leave the EU in next week’s referendum risks knocking economic growth, pushing the pound sharply lower and sending shockwaves through the global economy. | The Bank of England has issued a fresh warning that a vote to leave the EU in next week’s referendum risks knocking economic growth, pushing the pound sharply lower and sending shockwaves through the global economy. |
| Against the backdrop of jittery financial markets, the Bank also revealed its top policymakers had been briefed by staff on contingency planning for the referendum as it readies measures to prevent markets seizing up in the event of a leave vote next week. | Against the backdrop of jittery financial markets, the Bank also revealed its top policymakers had been briefed by staff on contingency planning for the referendum as it readies measures to prevent markets seizing up in the event of a leave vote next week. |
| Announcing its decision to keep interest rates at their record low of 0.5%, the Bank said the referendum on 23 June was the biggest immediate risk to UK financial markets, and perhaps those overseas, and that the current uncertainty was already denting spending. The pound has weakened in the run-up to the vote as opinion polls have pointed to a lead for the leave vote and the Bank warned in minutes to its latest rate-setting meeting that it would fall further in the event of Brexit. | Announcing its decision to keep interest rates at their record low of 0.5%, the Bank said the referendum on 23 June was the biggest immediate risk to UK financial markets, and perhaps those overseas, and that the current uncertainty was already denting spending. The pound has weakened in the run-up to the vote as opinion polls have pointed to a lead for the leave vote and the Bank warned in minutes to its latest rate-setting meeting that it would fall further in the event of Brexit. |
| “The outcome of the referendum continued to be the largest immediate risk facing UK financial markets, and possibly global financial markets,” said the minutes. In addition: “On the evidence of the recent behaviour of the foreign exchange market, it appears increasingly likely that, were the UK to vote to leave the EU, sterling’s exchange rate would fall further, perhaps sharply.” | “The outcome of the referendum continued to be the largest immediate risk facing UK financial markets, and possibly global financial markets,” said the minutes. In addition: “On the evidence of the recent behaviour of the foreign exchange market, it appears increasingly likely that, were the UK to vote to leave the EU, sterling’s exchange rate would fall further, perhaps sharply.” |
| The full story is here: | The full story is here: |
| Related: Bank of England: economy will be hit hard if Britain leaves EU | Related: Bank of England: economy will be hit hard if Britain leaves EU |
| 1.05pm BST | 1.05pm BST |
| 13:05 | 13:05 |
| But alternatively, a remain vote could mean a rate rise, some believe: | But alternatively, a remain vote could mean a rate rise, some believe: |
| #MPC gives strong warning on #Brexit risks in today's minutes. But a vote to stay would in our view make a turn-of-the-year rate hike likely | #MPC gives strong warning on #Brexit risks in today's minutes. But a vote to stay would in our view make a turn-of-the-year rate hike likely |
| 12.57pm BST | 12.57pm BST |
| 12:57 | 12:57 |
| ING predicts emergency rate cut if Brexit win | ING predicts emergency rate cut if Brexit win |
| Some economists believe the Bank of England would slash interest rates to fresh record lows if the UK votes to leave the EU next week. | Some economists believe the Bank of England would slash interest rates to fresh record lows if the UK votes to leave the EU next week. |
| James Knightley of ING predicts an emergency rate cut on Friday if the Leave campaign wins: | James Knightley of ING predicts an emergency rate cut on Friday if the Leave campaign wins: |
| He writes: | He writes: |
| In the case of Brexit, there is a high probability that inflation rises sharply as a result of currency weakness, but we think that the BoE will look through this, as they did in 2011. Instead we think the focus will be on the growth risks and financial market turbulence, which would dampen domestic inflation pressures over the medium term. | In the case of Brexit, there is a high probability that inflation rises sharply as a result of currency weakness, but we think that the BoE will look through this, as they did in 2011. Instead we think the focus will be on the growth risks and financial market turbulence, which would dampen domestic inflation pressures over the medium term. |
| Consequently, we would expect a 25bp rate cut on June 24th. | Consequently, we would expect a 25bp rate cut on June 24th. |
| Andrew McPhillips, chief economist at Yorkshire Building Society, also expects a cut: | Andrew McPhillips, chief economist at Yorkshire Building Society, also expects a cut: |
| “It is likely that if the UK votes to leave the EU, the MPC will cut base rate in an attempt to stabilise the economy. | “It is likely that if the UK votes to leave the EU, the MPC will cut base rate in an attempt to stabilise the economy. |
| Though this could lead to an increase in inflation due to the depreciation of Sterling, the Bank is likely to be willing to trade that off against trying to maintain economic growth and avoid the risk of increasing unemployment. | Though this could lead to an increase in inflation due to the depreciation of Sterling, the Bank is likely to be willing to trade that off against trying to maintain economic growth and avoid the risk of increasing unemployment. |
| 12.52pm BST | 12.52pm BST |
| 12:52 | 12:52 |
| Liberal Democrat leader Tim Farron, a Remain campaigner, has welcomed the Bank of England’s warning: | Liberal Democrat leader Tim Farron, a Remain campaigner, has welcomed the Bank of England’s warning: |
| “This is yet more independent evidence that our economy could plummet if we leave Europe. We cannot afford to let people like Norman Lamont crash the economy for a second time. This is not a political parlour game - people’s jobs, homes and businesses are at risk.” | “This is yet more independent evidence that our economy could plummet if we leave Europe. We cannot afford to let people like Norman Lamont crash the economy for a second time. This is not a political parlour game - people’s jobs, homes and businesses are at risk.” |
| [Lord Lamont, a Leave supporter, was chancellor on Black Wednesday when Britain crashed out of the European exchange rate mechanism] | [Lord Lamont, a Leave supporter, was chancellor on Black Wednesday when Britain crashed out of the European exchange rate mechanism] |
| 12.35pm BST | 12.35pm BST |
| 12:35 | 12:35 |
| The pound has fallen since the Bank of England minutes hit the wires. | The pound has fallen since the Bank of England minutes hit the wires. |
| It has lost one cent against the US dollar to hover around $1.41, near to a two-month low. | It has lost one cent against the US dollar to hover around $1.41, near to a two-month low. |
| Traders are also reacting to yet another poll showing Leave ahead. Survation reports that 45% of voters support Leave, with 42% backing Remain (and the rest undecided). | Traders are also reacting to yet another poll showing Leave ahead. Survation reports that 45% of voters support Leave, with 42% backing Remain (and the rest undecided). |
| 12.27pm BST | 12.27pm BST |
| 12:27 | 12:27 |
| Bank of England isn't pulling its punches. pic.twitter.com/G5eU9w4J7E | Bank of England isn't pulling its punches. pic.twitter.com/G5eU9w4J7E |
| 12.22pm BST | 12.22pm BST |
| 12:22 | 12:22 |
| Bank minutes: Referendum uncertainty across the economy | Bank minutes: Referendum uncertainty across the economy |
| The Bank of England’s policymakers heard plenty of evidence that the UK economy has weakened due to next week’s referendum vote. | The Bank of England’s policymakers heard plenty of evidence that the UK economy has weakened due to next week’s referendum vote. |
| The minute of the MPC meeting state that: | The minute of the MPC meeting state that: |
| In the corporate sector, this included a sharp decline in the value of commercial real estate transactions and M&A, and reports of delayed business investment. | In the corporate sector, this included a sharp decline in the value of commercial real estate transactions and M&A, and reports of delayed business investment. |
| Evidence from the Bank’s Agents had suggested increased delays in corporate decision making, which was corroborated by a Deloitte survey of chief financial officers. | Evidence from the Bank’s Agents had suggested increased delays in corporate decision making, which was corroborated by a Deloitte survey of chief financial officers. |
| Survey information from Markit/CIPS and the BCC showed that for a material proportion of responding firms the referendum was having a detrimental effect on business activity, sometimes significantly so. | Survey information from Markit/CIPS and the BCC showed that for a material proportion of responding firms the referendum was having a detrimental effect on business activity, sometimes significantly so. |
| They also point to signs that demand for new cars and houses has fallen recently. | They also point to signs that demand for new cars and houses has fallen recently. |
| However.... the Bank also points out that other surveys have shown consumer demand is solid (such as this morning’s strong retail sales). | However.... the Bank also points out that other surveys have shown consumer demand is solid (such as this morning’s strong retail sales). |
| Minutes of @bankofengland attribute a fall in property and even car sales to referendum uncertainty. pic.twitter.com/GSqBaGVmFn | Minutes of @bankofengland attribute a fall in property and even car sales to referendum uncertainty. pic.twitter.com/GSqBaGVmFn |
| 12.17pm BST | 12.17pm BST |
| 12:17 | 12:17 |
| The full Bank of England minutes are here. | The full Bank of England minutes are here. |
| Updated | Updated |
| at 12.57pm BST | at 12.57pm BST |
| 12.13pm BST | 12.13pm BST |
| 12:13 | 12:13 |
| You can read a summary of the Bank of England’s minutes yourselves, here. | You can read a summary of the Bank of England’s minutes yourselves, here. |
| Updated | Updated |
| at 12.16pm BST | at 12.16pm BST |
| 12.12pm BST | 12.12pm BST |
| 12:12 | 12:12 |
| The Bank of England appears to have hardened its Brexit warnings, despite pressure from the Leave campaign to cool things down. | The Bank of England appears to have hardened its Brexit warnings, despite pressure from the Leave campaign to cool things down. |
| Breaking: Bank of England strengthens its warnings on EU referendum risk - saying uncertainty could "spill-over" into global markets | Breaking: Bank of England strengthens its warnings on EU referendum risk - saying uncertainty could "spill-over" into global markets |
| Main #EURef related section of @bankofengland minutes today. Language similar to previous, if a little amplified pic.twitter.com/ytm4G6CZvM | Main #EURef related section of @bankofengland minutes today. Language similar to previous, if a little amplified pic.twitter.com/ytm4G6CZvM |
| 12.10pm BST | 12.10pm BST |
| 12:10 | 12:10 |
| BoE: Pound will probably tumble if Leave campaign win | BoE: Pound will probably tumble if Leave campaign win |
| Katie Allen | Katie Allen |
| The Bank of England has also issued a fresh warning that the pound will tumble in the event of a Brexit vote. | The Bank of England has also issued a fresh warning that the pound will tumble in the event of a Brexit vote. |
| The minutes state that: | The minutes state that: |
| “On the evidence of the recent behaviour of the foreign exchange market, it appears increasingly likely that, were the UK to vote to leave the EU, sterling’s exchange rate would fall further, perhaps sharply.” | “On the evidence of the recent behaviour of the foreign exchange market, it appears increasingly likely that, were the UK to vote to leave the EU, sterling’s exchange rate would fall further, perhaps sharply.” |
| The Bank also revealed its top policymakers had been briefed by staff on contingency planning for the referendum as it readies measures to prevent markets seizing up in the event of a leave vote next week. | The Bank also revealed its top policymakers had been briefed by staff on contingency planning for the referendum as it readies measures to prevent markets seizing up in the event of a leave vote next week. |
| 12.06pm BST | 12.06pm BST |
| 12:06 | 12:06 |
| Bank of England warns about referendum uncertainty | Bank of England warns about referendum uncertainty |
| The Bank of England has warned that next week’s EU referendum is already hurting the UK economy. | The Bank of England has warned that next week’s EU referendum is already hurting the UK economy. |
| It says there are signs that major spending decisions are being delayed, such as car and house purchases, as consumers and businesses wait to see if the UK votes to leave the European Union. | It says there are signs that major spending decisions are being delayed, such as car and house purchases, as consumers and businesses wait to see if the UK votes to leave the European Union. |
| In the minutes of this month’s monetary policy meeting, just released, they say: | In the minutes of this month’s monetary policy meeting, just released, they say: |
| The outcome of the referendum continues to be the largest immediate risk facing UK financial markets, and possibly also global financial markets. | The outcome of the referendum continues to be the largest immediate risk facing UK financial markets, and possibly also global financial markets. |
| While consumer spending has been solid, there is growing evidence that uncertainty about the referendum is leading to delays to major economic decisions that are costly to reverse, including commercial and residential real estate transactions, car purchases, and business investment | While consumer spending has been solid, there is growing evidence that uncertainty about the referendum is leading to delays to major economic decisions that are costly to reverse, including commercial and residential real estate transactions, car purchases, and business investment |
| Updated | Updated |
| at 12.23pm BST | at 12.23pm BST |