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No interest rate increase for now; Bank of England and ECB kept the rates steady as expected

Sep 14 • Morning Roll Call • 58 Views • No Comments

On Thursday all eyes were on the interest rate decisions coming from the UK and the EU, where no changes have been made. The decision to keep the interest rates steady at 0.75% by the BoE was mainly influenced by the Brexit situation. Bank of England indicated that any further rate hikes will be made at a gradual pace and will continue monitoring the developments regarding Brexit. In its policy summary, the bank stated that the future bank rate increases are likely to be at a gradual pace and to a limited extent. In addition, the Bank of England said that the Monitoring Policy Committee is aware of the influence that the UK’s exit from the European Union can have on have on the households, financial markets and businesses, thus during the Committee’s previous meeting there have been indications of higher uncertainty within the financial markets regarding future developments regarding Brexit. According to Reuters, the exporters that were surveyed for the Bank of England have seen a 40% chance that Brexit would negatively influence their sales, and businesses are tightening their cost control and are pulling back on investments ahead of March 2019. The following two months are crucial for Britain as London and Brussels are expected to have extensive talks in order to conclude the divorce deal.

In addition, the ECB has kept the interest rates unchanged yesterday, which was not an unexpected move and has repeated that the rates will remain at the current level at least through the summer of next year. The rate has remained at -0.4% and the refinancing rate was kept at 0.0%. At the post policy meeting press conference, European Central Bank President, Mario Draghi had stated that the current trade tensions may lead to a deterioration in business confidence on a global level, past any direct effects from trade tariffs. He has also confirmed that the ECB is sticking to its plan to end the asset purchase program at the beginning of 2019, however plans for reinvesting those assets have not yet been discussed between the policymakers.

Yesterday we have also seen important releases from the United States of America, where the CPI increased less than expected in August, where excluding the food and energy products, CPI came at 0.1%, whereas the economists were expecting 0.3% increase. The Fed is expected to rise the interest rates at the end of this month, however a tenacious slowdown in inflation could affect the outlook of future increases.

Regarding the unemployment claims form the US, on Thursday we saw positive reading as the number of people who have filed for unemployment had rose less than expected, with 204k unemployment claims, as opposed to the expected 210k.

 

ECONOMIC CALENDAR EVENTS FOR SEPTEMBER 14th

NZD Business NZ Manufacturing Index
NZD Fixed Asset Investment ytd/y
EUR Trade Balance
GBP BOE Gov Carney Speaks
USD Core Retail Sales m/m
USD Retail Sales m/m
USD Prelim UoM Consumer Sentiment

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