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Bank of England interest rate decision - business live Bank of England interest rate decision - business live
(35 minutes later)
11.37am BST
11:37
City experts are still making forecasts, as the clock ticks towards noon.
ABN Amro’s Nick Kounis predicts a £150bn boost to quantitative easing and a quarter-point rate cut:
My expectation for #BoE : (a) GBP 150bn increase in asset purchase target (b) ease conditions in Funding4Lending (c) 25bp Bank Rate cut
But IG’s Chris Beauchamp points out that the Bank of England could surprise us...
Given last month’s distinctly uneventful meeting, plus the range of other options open to Mark Carney and his team, we should be careful before assuming a course of action is pre-determined. Mr Carney, after all, is still known as the ‘unreliable boyfriend’.
11.30am BST
11:30
The pound has now recovered its earlier losses, and is hovering unchanged at $1.333 against the US dollar.
Trader are worrying that the Bank of England may be more ‘hawkish’ than forecast. You can expect sterling to soar if rates are unexpectedly left on hold in 30 minutes....
11.26am BST
11:26
Royal Bank of Canada’s economics team have sent over a useful chart, showing how the financial markets have already priced in an interest rate cut:
SONIA is the overnight interest rate charged on deposits held in sterling. As you can see, the blue line shows how it is expected to drop to just 0.1% by early 2017.
11.16am BST
11:16
Here’s a handy reminder of the recent disappointing economic data, which has put pressure on the Bank of England to consider a rate cut today:
UK data before and after #Brexit @CNBC pic.twitter.com/NWBKvnhCuh
11.16am BST
11:16
Mark Carney could use his press conference to put pressure on Westminster politicians to boost government spending (as Labour’s John McDonnell argued for this morning):
Actually - if I was Carney, I'd spent the press conference repeatedly saying "fiscal policy has a big role to play here".
11.03am BST11.03am BST
11:0311:03
Lizzy Anderson of the Independent flags up how savers have suffered from seven years of record low borrowing costs:Lizzy Anderson of the Independent flags up how savers have suffered from seven years of record low borrowing costs:
What low interest rates mean: A pensioner buying an annuity with £100,000 would now receive £5,106 p/a. In early 2008, would have got £7,908What low interest rates mean: A pensioner buying an annuity with £100,000 would now receive £5,106 p/a. In early 2008, would have got £7,908
Interest rates since the Bank of England was formed in 1694. A cut today would mean a new 322-year record pic.twitter.com/7hn2qKVglKInterest rates since the Bank of England was formed in 1694. A cut today would mean a new 322-year record pic.twitter.com/7hn2qKVglK
The counterfactual, of course, is that tighter monetary policy would have hurt the economy, driving more companies to the wall and ultimately hurting the value of assets owned by savers.The counterfactual, of course, is that tighter monetary policy would have hurt the economy, driving more companies to the wall and ultimately hurting the value of assets owned by savers.
11.00am BST11.00am BST
11:0011:00
ONE HOUR TO GO, until the Bank of England reveals if interest rates are being cut to fresh record lows.ONE HOUR TO GO, until the Bank of England reveals if interest rates are being cut to fresh record lows.
Pound treading water before Bank of England - all those shorts could get stopped if MPC delivers hawkish surprise pic.twitter.com/t8n3dzo7P5Pound treading water before Bank of England - all those shorts could get stopped if MPC delivers hawkish surprise pic.twitter.com/t8n3dzo7P5
10.49am BST10.49am BST
10:4910:49
The slump in sterling since the Brexit vote is another reason to NOT cut interest rates today, argues economist Shaun Richards:The slump in sterling since the Brexit vote is another reason to NOT cut interest rates today, argues economist Shaun Richards:
Just because there is pressure to “do something” does not mean that “something” will “do”.Just because there is pressure to “do something” does not mean that “something” will “do”.
I would vote for unchanged policy as I waited to see how we respond to the lower value of the UK Pound,which on the old rule of thumb has provided a move equivalent to a 2% Bank Rate cut.I would vote for unchanged policy as I waited to see how we respond to the lower value of the UK Pound,which on the old rule of thumb has provided a move equivalent to a 2% Bank Rate cut.
More here:More here:
@graemewearden My thoughts on Super Thursday and the BoE for you https://t.co/3aWkwVlV4e@graemewearden My thoughts on Super Thursday and the BoE for you https://t.co/3aWkwVlV4e
UpdatedUpdated
at 10.49am BSTat 10.49am BST
10.28am BST10.28am BST
10:2810:28
Six weeks ago, Britain was heading to the polls in the EU referendum.Six weeks ago, Britain was heading to the polls in the EU referendum.
An awful lot has changed since, but it’s too early to know the full economic impact of the Brexit vote. So while recent data has suggested a contraction in July, the Bank of England may not feel compelled to ease monetary policy dramatically today.An awful lot has changed since, but it’s too early to know the full economic impact of the Brexit vote. So while recent data has suggested a contraction in July, the Bank of England may not feel compelled to ease monetary policy dramatically today.
Alan Wilde, Head of Fixed Income, Global, at Baring Asset Management, explains why:Alan Wilde, Head of Fixed Income, Global, at Baring Asset Management, explains why:
When the MPC met in July, Carney seemed to pre-commit to an easing of policy in August, but there was then a huge amount of economic and political uncertainty.When the MPC met in July, Carney seemed to pre-commit to an easing of policy in August, but there was then a huge amount of economic and political uncertainty.
Meantime, we have a new PM and Government and markets are calm. The risk today is that markets are anticipating too much in the way of immediate easing when the MPC may wish to keep some powder dry to act in the future – should circumstances demand they do so.Meantime, we have a new PM and Government and markets are calm. The risk today is that markets are anticipating too much in the way of immediate easing when the MPC may wish to keep some powder dry to act in the future – should circumstances demand they do so.
10.04am BST10.04am BST
10:0410:04
The UK economics press pack are converging on the Bank of England.The UK economics press pack are converging on the Bank of England.
They’ll soon be locked away, and given an early sight at today’s inflation report, and the interest rate decision.They’ll soon be locked away, and given an early sight at today’s inflation report, and the interest rate decision.
In @bankofengland getting nervous. Fingers crossed they don't go for BoAML @toby_n swap auction idea. Nightmare to understand/write up !In @bankofengland getting nervous. Fingers crossed they don't go for BoAML @toby_n swap auction idea. Nightmare to understand/write up !
In the meantime getting funny looks as I attempt historic Super Thursday selfie pic.twitter.com/8e02nHiZVNIn the meantime getting funny looks as I attempt historic Super Thursday selfie pic.twitter.com/8e02nHiZVN
9.55am BST9.55am BST
09:5509:55
HSBC’s Liz Martins predicts a rate cut, but no fresh quantitative easing, in response to recent disappointing economic data.HSBC’s Liz Martins predicts a rate cut, but no fresh quantitative easing, in response to recent disappointing economic data.
QUOTE OF THE DAY: Elizabeth Martins/HSBC: "The surveys have almost without exception pointed to an economy in shock" pic.twitter.com/6Lrunq0KWVQUOTE OF THE DAY: Elizabeth Martins/HSBC: "The surveys have almost without exception pointed to an economy in shock" pic.twitter.com/6Lrunq0KWV
9.52am BST9.52am BST
09:5209:52
Mark Carney was dubbed the “outstanding central banker of his generation” when he was surprisingly appointed as BoE governor in late 2012.Mark Carney was dubbed the “outstanding central banker of his generation” when he was surprisingly appointed as BoE governor in late 2012.
And events like today will test Carney’s mettle, as Eric Lonergan, macro investment fund manager at M&G Investments, explains:And events like today will test Carney’s mettle, as Eric Lonergan, macro investment fund manager at M&G Investments, explains:
“Today’s Monetary Policy Committee meeting is extremely important and the range of potential outcomes is far wider than market commentators are suggesting. This will be the first serious decision Mark Carney has made since becoming Governor – and we will find out whether he is conventional and timid, or innovative and bold.“Today’s Monetary Policy Committee meeting is extremely important and the range of potential outcomes is far wider than market commentators are suggesting. This will be the first serious decision Mark Carney has made since becoming Governor – and we will find out whether he is conventional and timid, or innovative and bold.
“The markets are generally expecting a conventional and relatively dull decision: a cut in base rates of 25bps and additional QE. This may be the case but many other outcomes are possible; for example the cut in interest rates could be much more extreme at 75bps, along with the introduction of tiered reserves, as Japan has done. Alternatively, there could be no change in rates but the introduction of a ‘helicopter money’ programme in coordination with the Treasury.“The markets are generally expecting a conventional and relatively dull decision: a cut in base rates of 25bps and additional QE. This may be the case but many other outcomes are possible; for example the cut in interest rates could be much more extreme at 75bps, along with the introduction of tiered reserves, as Japan has done. Alternatively, there could be no change in rates but the introduction of a ‘helicopter money’ programme in coordination with the Treasury.
“The effects of the decision could be of global relevance – particularly if there is a major innovation in policy.“The effects of the decision could be of global relevance – particularly if there is a major innovation in policy.
9.43am BST9.43am BST
09:4309:43
A few economists are predicting that the Bank of England will resist the clamour to cut interest rates today:A few economists are predicting that the Bank of England will resist the clamour to cut interest rates today:
Most dovish BoE forecasts: JP Morgan and 4Cast going for 50 bps rate cut to 0%.Least dovish: BayernLB, Julius Baer, SEB going for no changeMost dovish BoE forecasts: JP Morgan and 4Cast going for 50 bps rate cut to 0%.Least dovish: BayernLB, Julius Baer, SEB going for no change
9.25am BST
09:25
There’s an edgy calm in the London stock market this morning.
The FTSE 100 index has dropped by a modest 8 points, to 6626, as investors count down towards the Bank of England decision at noon.
Augustin Eden, research analyst at Accendo Markets, says traders are wondering how aggressive the Bank will be today:
Official forecasts are now for a 25bp interest rate cut and no change in the central bank’s QE programme. However many are saying the BoE should throw the kitchen sink at what might after all turn out to be a post-Brexit economic recession, before it happens.
Updated
at 9.26am BST
9.17am BST
09:17
Mark Wilson, the boss of insurance group Aviva, is hoping (in vain) that the BoE leaves interest rates on hold.
Ahead of expected Bank of England rate cut - Mark Wilson, CEO of Aviva: "“I’m not sure what question the rate cut is trying to answer."
Record low borrowing costs are already causing headaches in the financial sector, as they’ve driven down the rate of return on government bonds (which is particularly awkward for pension funds).
9.06am BST
09:06
Fred Ducrozet, economist at Swiss bank Pictet, predicts that the Bank of England will launch a major, three-pronged stimulus programme today.
He’s forecasting that rates would be slashed to just 0.1%, alongside a new funding for lending push and £50bn of new money pumped into the system via quantitative easing.
#BoEguesses 40bp rate cut; extended FLS; £50bn QE (Gilts + corporate)
Updated
at 9.06am BST
8.56am BST
08:56
A Bloomberg poll of 52 economists has found that 50 expect a quarter-point interest rate cut today:
Updated
at 9.33am BST
8.46am BST
08:46
City investors have already bet against the pound in record numbers, in anticipation of a rate cut today, as this chart from Reuters shows:
Sterling could be poised for a sharp bounce if BoE disappoints today. Speculators holding record short positions: pic.twitter.com/ZfHfLs9snW
8.37am BST
08:37
McDonnell: Government must ease fiscal policy now
John McDonnell, Labour’s shadow chancellor, is also predicting an interest rate cut at noon.
He tells the Today Programme that “a small cut is almost inevitable now”, given the worrying signs from the UK economy.
McDonnell backs Danny Blanchflower’s call for a VAT cut, arguing:
It’s a very creative idea - we need a stimulus like that.
But McDonnell insists that the UK economy can’t be healed simply through monetary policy. Fiscal policy (government spending) needs to be deployed too.
I want to see the government now looking at its investment stratetegy
Hammond, the chancellor, has said he’s not going reset the government’s fiscal rule or its economic stratedy until the Autumn. And I think that’s too late. We need action now.
Businesses are holding off investment decisions because they’re getting the “wrong signals” from government, and we can’t wait until the Autumn Statement to act, McDonnell adds.
He wants to take advantage of Britain’s current record low borrowing costs, to borrow an extra £250bn for investment plus £100bn to fund a National Investment Bank. That Bank could then “lever in” £250bn of private sector cash, to pay for investment projects.
John McDonnell urges government to bring forward investment decisions and borrow more to pay for them. #r4today pic.twitter.com/QgO6TCLdEP
Updated
at 10.00am BST
8.26am BST
08:26
Blanchflower: Rate cut is 'almost inevitable'
Danny Blanchflower, economics professor and former member of the Bank’s monetary policy committee, reckons an interest rate cut is a nailed-on certainty.
Speaking to the Today programme, he says:
It’s almost inevitable that it will be at least a cut of 25 basis points. The question is will it be more?
Markets don’t like surprises, and everyone is expecting it.
The data worsened a lot since the last meeting [in July]. So the expectation is, and I’m pretty sure that the members of Committee will sit there and think ‘everyone thinks we’re going to go, I think we’re going to have to’.
Blanchflower also argues that there are similarities with 2008 (when he served on the MPC), when the Bank eased monetary policy dramatically.
If the economic data continues to worsen quickly, he says, we could get several episodes of action.
Q: Could that include negative interest rates?
Every other central bank in Europe have negative rates of about 0.5%, and Japan does too.
So it could happen - not at today’s meeting, but I don’t rule it out.
Blanchflower also believes that the government needs to relax fiscal policy, including cutting VAT by 5 percentage points (from 20% to 15%).
8.15am BST
08:15
The pound is weakening in early trading, as City traders anticipate an interest rate cut at noon.
Sterling is down around 0.3% against the US dollar at $1.328.
£/$ volatility surges ahead of #BOE rate decision...market seeing 99% chance of rate cut. pic.twitter.com/KybeiR4nwF
8.14am BST
08:14
Our economics editor, Larry Elliott, has rummaged around in the Bank of England’s arsenal to find the weapons at its disposal today:
They are:
Larry expects a quarter-point cut, plus a new funding for lending scheme and perhaps QE as well.
Related: What are the Bank of England's options for Super Thursday?
7.36am BST
07:36
The Agenda: Bank of England Super Thursday
Good morning.
Has the moment finally come? For the first time in over seven years, British savers and borrowers could actually see an interest rate cut today, as policymakers try to ward off a recession.
Over in the City of London, the Bank of England is putting the finishing touches to its latest quarterly inflation report. It’s the Bank’s first major policy decision since Britain voted to leave the EU in June, and the stakes are high.
Some economists expect the Bank to announce a significant stimulus package today, to response to signs that the UK economy has slowed sharply in the last six weeks
This could include slashing borrowing costs to fresh record lows, down from 0.5%. We could also get a new bout of quantitative easing – creating new money to buy government bonds – and perhaps fresh measures to encourage bank lending as well.
As Investec economist Philip Shaw argues:
“There is enough evidence on the negative shock to the economy that some easing is justified.”
That evidence includes new business surveys showing that the UK economy appears to be shrinking by around 0.4%, as orders drop and confidence wanes.
Related: UK services sector contraction adds to recession fears
This would be the first interest rate cut since the depths of the financial crisis, back in the days when the collapse of Lehman Brothers provoked market mayhem and a global downturn.
Global markets have dubbed today as the #BoE’s super Thursday as they expect it to cut its bank rate to 0.25% from the current 0.50%
Welcome to Super Thurs: when a entire generation of cherubic financial journalists finally get to write about a Bank of England rate move
On the other hand.... the Bank might decide to hold fire until September. That would give more time to assess the economic situation, and see how the government responds to the Brexit vote.
That would disappoint many in the City, and could provoke some wild swings the markets.
So either way, it’s going to be a pretty dramatic day. The new quarterly inflation report should also be fascinating, as the Bank is likely to slash its growth forecasts following the EU referendum vote.
Here’s the timings:
We’ll be tracking all the build-up to the big decision at noon, followed by instant analysis and reaction as the news unfolds.
Updated
at 7.58am BST