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You can find the current article at its original source at https://www.theguardian.com/business/live/2016/jul/14/bank-of-england-interest-rates-cut-brexit-record-low-today-business-live
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| Version 13 | Version 14 |
|---|---|
| Bank of England surprises City by leaving interest rates on hold – as it happened | Bank of England surprises City by leaving interest rates on hold – as it happened |
| (about 1 month later) | |
| 3.23pm BST | 3.23pm BST |
| 15:23 | 15:23 |
| That's all for today | That's all for today |
| The dust is settling across the City after the Bank of England ducked away from cutting rates to fresh record lows. | The dust is settling across the City after the Bank of England ducked away from cutting rates to fresh record lows. |
| Economists and analysts are turning their attention back to Downing Street, as Theresa May continues to reshape the government.... | Economists and analysts are turning their attention back to Downing Street, as Theresa May continues to reshape the government.... |
| ...although some traders are being distracted by Mont Ventoux instead: | ...although some traders are being distracted by Mont Ventoux instead: |
| Oh: 'forget Brexit, the G20 desk is watching the Tour de France' | Oh: 'forget Brexit, the G20 desk is watching the Tour de France' |
| So, that’s a good moment to wrap up. Here’s our news story on the Bank of England’s decision: | So, that’s a good moment to wrap up. Here’s our news story on the Bank of England’s decision: |
| Have a good evening. GW | Have a good evening. GW |
| 3.02pm BST | 3.02pm BST |
| 15:02 | 15:02 |
| Good reasons for not cutting rates today | Good reasons for not cutting rates today |
| Our economics editor, Larry Elliott, says there are five good reasons for leaving interest rates on hold: | Our economics editor, Larry Elliott, says there are five good reasons for leaving interest rates on hold: |
| Firstly, the Bank wants to have a closer look at the state of the economy before moving. There has been very little hard data since 23 June but the picture will be clearer by the time of the next MPC meeting in early August, which coincides with the release of the Bank’s quarterly assessment of the state of the nation. | Firstly, the Bank wants to have a closer look at the state of the economy before moving. There has been very little hard data since 23 June but the picture will be clearer by the time of the next MPC meeting in early August, which coincides with the release of the Bank’s quarterly assessment of the state of the nation. |
| This will provide forecasts for growth and inflation over the coming months, and provide a justification for whatever the Bank decides to do. | This will provide forecasts for growth and inflation over the coming months, and provide a justification for whatever the Bank decides to do. |
| Secondly, the financial market reaction since the referendum has been less acute than looked likely in late June. Share prices have bounced, the pound has stabilised and even edged up a bit on the foreign exchanges, and long-term interest rates have fallen. | Secondly, the financial market reaction since the referendum has been less acute than looked likely in late June. Share prices have bounced, the pound has stabilised and even edged up a bit on the foreign exchanges, and long-term interest rates have fallen. |
| Thirdly, the economy has received something of a stimulus from the fall in the pound – which boosts exports – and from the Bank’s decision to ease the capital requirements on commercial banks, which increases their capacity to lend. | Thirdly, the economy has received something of a stimulus from the fall in the pound – which boosts exports – and from the Bank’s decision to ease the capital requirements on commercial banks, which increases their capacity to lend. |
| Fourthly, it is hard to see what material effect a cut in interest rates to 0.25% will have, given that they are already at record low levels. The situation is different now from the aftermath of Black Wednesday in September 1992, when borrowing costs could be cut aggressively from 10%. | Fourthly, it is hard to see what material effect a cut in interest rates to 0.25% will have, given that they are already at record low levels. The situation is different now from the aftermath of Black Wednesday in September 1992, when borrowing costs could be cut aggressively from 10%. |
| Finally, there was a risk that by acting in a kneejerk fashion, the Bank could make matters worse. If consumers and businesses get the impression that the Bank is being rushed into action, it could further dent confidence. | Finally, there was a risk that by acting in a kneejerk fashion, the Bank could make matters worse. If consumers and businesses get the impression that the Bank is being rushed into action, it could further dent confidence. |
| Good read on the Bank of England's "cool head" from @BusinessDesk :https://t.co/m80avg6IpN | Good read on the Bank of England's "cool head" from @BusinessDesk :https://t.co/m80avg6IpN |
| Updated | Updated |
| at 3.10pm BST | at 3.10pm BST |
| 2.53pm BST | 2.53pm BST |
| 14:53 | 14:53 |
| No chance of a quiet August.... | No chance of a quiet August.... |
| #BoE Gov #Carney & MPC have set things up so it really will be a #SuperThursday on 4 Aug. Awwww, thanks guys | #BoE Gov #Carney & MPC have set things up so it really will be a #SuperThursday on 4 Aug. Awwww, thanks guys |
| 1.55pm BST | 1.55pm BST |
| 13:55 | 13:55 |
| The pound is now on track for its best week in over six years, according to Jeremy Cook of World First. | The pound is now on track for its best week in over six years, according to Jeremy Cook of World First. |
| GBPUSD up 3.1% so far on the week, needs checking but I make that the best week since October 2009 | GBPUSD up 3.1% so far on the week, needs checking but I make that the best week since October 2009 |
| But as this graph shows, sterling is still around 10% below its pre-referendum levels. | But as this graph shows, sterling is still around 10% below its pre-referendum levels. |
| 1.33pm BST | 1.33pm BST |
| 13:33 | 13:33 |
| Rates on hold: What the economists say | Rates on hold: What the economists say |
| More reaction is flooding in, and many economists are saying the Bank made the right call by leaving interest rates unchanged. | More reaction is flooding in, and many economists are saying the Bank made the right call by leaving interest rates unchanged. |
| Andrew Sentance, senior economic adviser at PwC, calls it a “very sensible decision”. | Andrew Sentance, senior economic adviser at PwC, calls it a “very sensible decision”. |
| Sentance, a former member of the MPC, argues that the Bank should also sit tight in August: | Sentance, a former member of the MPC, argues that the Bank should also sit tight in August: |
| Though political events have been fast-moving, there is a need for stable economic policy until we are clearer how the economy is performing in the wake of the EU Referendum result. That will not be clear until the Autumn, and the MPC should hold fire until then. The MPC still won’t have enough information in August to make a proper assessment of the post-Brexit economic situation. | Though political events have been fast-moving, there is a need for stable economic policy until we are clearer how the economy is performing in the wake of the EU Referendum result. That will not be clear until the Autumn, and the MPC should hold fire until then. The MPC still won’t have enough information in August to make a proper assessment of the post-Brexit economic situation. |
| “Looking further ahead, the MPC needs to recognise that interest rates are already extremely low and have been for seven years. So there is very little that monetary policy can now do to support the economy. We need to look to fiscal policy - government spending and tax measures - and supply-side policies, which aim to make the UK a more attractive environment for business activity, to offset the shock of the Brexit decision.” | “Looking further ahead, the MPC needs to recognise that interest rates are already extremely low and have been for seven years. So there is very little that monetary policy can now do to support the economy. We need to look to fiscal policy - government spending and tax measures - and supply-side policies, which aim to make the UK a more attractive environment for business activity, to offset the shock of the Brexit decision.” |
| Arnaud Masset, market analyst at Swissquote Bank, believes the Bank is rightly hesitant to commit to any major moves while the Brexit situation is uncertain. | Arnaud Masset, market analyst at Swissquote Bank, believes the Bank is rightly hesitant to commit to any major moves while the Brexit situation is uncertain. |
| This wait-and-see approach is now appropriate, especially given the fact that the UK’s future relationship with the EU remains so unclear. The BoE will continue to wait for the smoke to clear before pushing the panic button.” | This wait-and-see approach is now appropriate, especially given the fact that the UK’s future relationship with the EU remains so unclear. The BoE will continue to wait for the smoke to clear before pushing the panic button.” |
| Ranko Berich, Head of Market Analysis at Monex Europe, says it all depends on the data: | Ranko Berich, Head of Market Analysis at Monex Europe, says it all depends on the data: |
| “The Bank of England has stayed true to form and today’s decision is consistent with its “wait and see” approach to monetary policy.” | “The Bank of England has stayed true to form and today’s decision is consistent with its “wait and see” approach to monetary policy.” |
| As recently as this week’s FPC testimony, Carney was emphasising that the direction of the monetary policy response to Brexit would depend on the relative effects of demand, supply, and sterling. Under this model, the BoE’s decision to hold fire on rates makes sense as there’s not yet enough data to decide on the appropriate response, even if most committee members are clearly leaning towards easing policy. | As recently as this week’s FPC testimony, Carney was emphasising that the direction of the monetary policy response to Brexit would depend on the relative effects of demand, supply, and sterling. Under this model, the BoE’s decision to hold fire on rates makes sense as there’s not yet enough data to decide on the appropriate response, even if most committee members are clearly leaning towards easing policy. |
| City analyst Louise Cooper questions whether a rate cut would actually do any good: | City analyst Louise Cooper questions whether a rate cut would actually do any good: |
| Cutting rates from here unlikely stimulate spendingMay even send -ve msg to consumers & bizDamages bank profits https://t.co/G4bPzLSJqf | Cutting rates from here unlikely stimulate spendingMay even send -ve msg to consumers & bizDamages bank profits https://t.co/G4bPzLSJqf |
| James Andrews, Head of Investment Management at Redmayne-Bentley, an investment management and stockbroking firm, cautions that an August rate cut isn’t guaranteed: | James Andrews, Head of Investment Management at Redmayne-Bentley, an investment management and stockbroking firm, cautions that an August rate cut isn’t guaranteed: |
| “It remains to be seen whether we will see a cut next month once the Bank of England have more hard data on the economic impact of the vote to leave. It’s clear that currently all they have is sentiment, rather than hard data on which to base a decision, and have therefore erred on the side of caution. | “It remains to be seen whether we will see a cut next month once the Bank of England have more hard data on the economic impact of the vote to leave. It’s clear that currently all they have is sentiment, rather than hard data on which to base a decision, and have therefore erred on the side of caution. |
| In the short term, we would expect further pain for domestically focussed UK listed companies as no further stimulus/support for the economy has been forthcoming at this time.” | In the short term, we would expect further pain for domestically focussed UK listed companies as no further stimulus/support for the economy has been forthcoming at this time.” |
| 1.13pm BST | 1.13pm BST |
| 13:13 | 13:13 |
| Bloomberg’s Kevin Young captured the moment when the City learned that UK interest rates were on hold, sending sterling up by two cents: | Bloomberg’s Kevin Young captured the moment when the City learned that UK interest rates were on hold, sending sterling up by two cents: |
| Wow - watch how the pound surged on the Bloomberg terminal after Bank of England rate decision pic.twitter.com/GFqQyyGzBc | Wow - watch how the pound surged on the Bloomberg terminal after Bank of England rate decision pic.twitter.com/GFqQyyGzBc |
| 12.58pm BST | 12.58pm BST |
| 12:58 | 12:58 |
| Is Mark Carney the 'unreliable boyfriend' again? | Is Mark Carney the 'unreliable boyfriend' again? |
| Alan Clarke, economist at Scotia Bank, has blasted Mark Carney for creating the impression that the Bank of England might cut rates today. | Alan Clarke, economist at Scotia Bank, has blasted Mark Carney for creating the impression that the Bank of England might cut rates today. |
| He writes that Carney, who was famously labelled an ‘unreliable boyfriend’ early in his tenure, should have known better. | He writes that Carney, who was famously labelled an ‘unreliable boyfriend’ early in his tenure, should have known better. |
| If ever there was a case for abandoning forward guidance and central bankers keeping quiet, this meeting is it. | If ever there was a case for abandoning forward guidance and central bankers keeping quiet, this meeting is it. |
| Virtually nobody was going for a rate cut at this meeting before Carney’s intervention a couple of weeks ago. Most assumed that the weakness of the pound and the need to wait for incoming data would lead to a pause at least until August. But for no apparent reason, Governor Carney decided to tease the market, let it price in a high probability of a rate cut, only to disappoint. | Virtually nobody was going for a rate cut at this meeting before Carney’s intervention a couple of weeks ago. Most assumed that the weakness of the pound and the need to wait for incoming data would lead to a pause at least until August. But for no apparent reason, Governor Carney decided to tease the market, let it price in a high probability of a rate cut, only to disappoint. |
| As if the situation wasn’t volatile and uncertain enough, the BoE Governor poured petrol on the flames. This was a completely unnecessary intervention. | As if the situation wasn’t volatile and uncertain enough, the BoE Governor poured petrol on the flames. This was a completely unnecessary intervention. |
| 12.53pm BST | 12.53pm BST |
| 12:53 | 12:53 |
| Duncan Weldon, head of research at the Resolution Group, has an interesting theory. | Duncan Weldon, head of research at the Resolution Group, has an interesting theory. |
| He reckons that Bank of England might not cut rates next month either, and might launch more quantitative easing or a new funding for lending scheme (FLS) instead. | He reckons that Bank of England might not cut rates next month either, and might launch more quantitative easing or a new funding for lending scheme (FLS) instead. |
| He’s basing that on the Bank’s minutes (the part I posted a few minutes ago) | He’s basing that on the Bank’s minutes (the part I posted a few minutes ago) |
| I'm not sure the BOE is pre announcing a cut for next month. I'm reading paras 35-37 as talking up other options - FLS, QE, etc. | I'm not sure the BOE is pre announcing a cut for next month. I'm reading paras 35-37 as talking up other options - FLS, QE, etc. |
| I'm not sure this coming easing is going to involve base rate cuts. Emphasis in minutes on functioning of financial system looks important. | I'm not sure this coming easing is going to involve base rate cuts. Emphasis in minutes on functioning of financial system looks important. |
| If I'm right - we need some strong signalling from MPC members in the next three weeks to avoid disappointing market. | If I'm right - we need some strong signalling from MPC members in the next three weeks to avoid disappointing market. |
| 12.49pm BST | 12.49pm BST |
| 12:49 | 12:49 |
| Shares in London have fallen back following the surprise news that UK interest rates are on hold. | Shares in London have fallen back following the surprise news that UK interest rates are on hold. |
| The FTSE 100 index, which was up 60 points at 11.59am, is now flat. | The FTSE 100 index, which was up 60 points at 11.59am, is now flat. |
| That’s largely due to the surge in sterling -- a stronger pound will eat into the overseas earnings of the large multinationals in the blue-chip index. | That’s largely due to the surge in sterling -- a stronger pound will eat into the overseas earnings of the large multinationals in the blue-chip index. |
| 12.45pm BST | 12.45pm BST |
| 12:45 | 12:45 |
| UK interest rates have never been this low, and they’ve rarely been unchanged for this long. | UK interest rates have never been this low, and they’ve rarely been unchanged for this long. |
| The Bank of England Bank Rate remains at a 322 year low for at least a few more weeks. pic.twitter.com/8WvLrABAgu | The Bank of England Bank Rate remains at a 322 year low for at least a few more weeks. pic.twitter.com/8WvLrABAgu |
| 12.35pm BST | 12.35pm BST |
| 12:35 | 12:35 |
| With interest rates remaining stable, there is no need to update our monetary policy symphony.... | With interest rates remaining stable, there is no need to update our monetary policy symphony.... |
| 12.32pm BST | 12.32pm BST |
| 12:32 | 12:32 |
| Commercial property prices are going to suffer ‘sizeable’ falls following last month’s Brexit vote, says the Bank of England. | Commercial property prices are going to suffer ‘sizeable’ falls following last month’s Brexit vote, says the Bank of England. |
| It has also trimmed its forecast for house price rises. | It has also trimmed its forecast for house price rises. |
| Today’s minutes state that: | Today’s minutes state that: |
| Regarding the housing market, a preview of the June RICS survey had pointed to a marked weakening in expected activity and prices following the referendum result. Bank staff had lowered their forecast of housing investment significantly and had revised down the near-term outlook for house prices. | Regarding the housing market, a preview of the June RICS survey had pointed to a marked weakening in expected activity and prices following the referendum result. Bank staff had lowered their forecast of housing investment significantly and had revised down the near-term outlook for house prices. |
| The forecast for housing investment had a direct read-across to GDP, while the outlook for house prices was expected to act as a drag on household consumption. Staff were also expecting sizeable falls in commercial real estate prices in the near term. | The forecast for housing investment had a direct read-across to GDP, while the outlook for house prices was expected to act as a drag on household consumption. Staff were also expecting sizeable falls in commercial real estate prices in the near term. |
| Updated | Updated |
| at 12.39pm BST | at 12.39pm BST |