Aurelia Butler

The Bank Rate was held at 5.25% for the second meeting in a row after 14 back-to-back rate increases and the BoE published forecasts showing the British economy is now skirting close to a recession.MARKET REACTION:STOCKS: Britain’s benchmark FTSE 100 index held onto its earlier gains and was last up 1.2% on the day. FOREX: Sterling was last up 0.54% at $1.2214. It was trading around 0.35% higher before the BoE decision at $1.2193.Bonds: Benchmark 10-year UK bond yields were last down 13 basis points (bps) on the day at 4.36%, extending earlier falls. COMMENTS: SAMUEL ZIEF, HEAD OF GLOBAL FX STRATEGY AT J.P. MORGAN PRIVATE BANK, LONDON:”The BoE told us that further tightening requires fresh evidence of inflation persistence. Data since the last meeting has not met that threshold.” “They’ll likely be sitting on ‘Table Mountain’ for a while, but in our view the next move for the BoE will be to lower rates. The BoE evidently doesn’t disagree; its forecasts see inflation returning to target in 2025 if rates remain unchanged into next year and then gradually decline.” “With the BoE in hand after the Fed yesterday and the ECB last week, all of the major central banks are now on hold in our view. At the same time, growth and inflation – particularly in Europe – are both moving in the same direction: lower. That’s a strong backdrop for fixed income; we like owning European bonds across the curve and funding tactical FX trades out of euro and sterling.”CHRIS BEAUCHAMP, CHIEF MARKET ANALYST AT IG GROUP, LONDON:”The BoE has struck a similar tone to the Fed, and today’s 6-3 result shows that caution is spreading to central banks outside the U.S. While it’s still clear that rate cuts are off the table for the foreseeable, it seems the bar for another rate hike has been raised a little today”.CHARLES WHITE THOMSON, CEO AT SAXO UK, LONDON:”The central bank ‘synchronized swimming’ interest rate decision teams have been out in full force. The UK, US and Europe all in unison – rates on hold but alert and decisive to hike again if inflation starts to regroup and go up again.” “Consensus and synchronisation are concerning, and we should remind ourselves that not all inflations are created the same and neither are individual economies. Through this lens, the U.S. are better positioned with Europe and the UK lagging behind as they are hampered by anaemic economic growth. In the UK’s case, it also has to deal with a virulent variation of inflation.”MICHAEL FIELD, SENIOR EQUITY STRATEGIST AT MORNINGSTAR, AMSTERDAM: “This will come as some small relief for markets, but any positivity coming from this announcement today has been lost in the euphoria on the news that the U.S. Federal Reserve is likely finished with rate increases, which should buoy the global economy.” “That the Bank (of England) could also be finished with rate rises, and may even start cutting early next year, is something to be celebrated, both by businesses and cash-strapped mortgage holders. But at the same time, it is easy to forget how quickly and strongly rates rose. At 5.25%, base rates stand at their highest level since before the financial crisis.” JEREMY BATSTONE-CARR, STRATEGIST, RAYMOND JAMES, FRANCE:”Soft economic activity and inflationary pressures persist, but the fact that these are no worse than forecast contributed to today’s conclusion to hold the rate steady. The rise in longer dated government bond yields, in large part the consequence of global factors, has served to tighten financial conditions and done a share of the MPC’s (Monetary Policy Committee) work for it.””The question going forward is how long this standstill will last for – with financial markets expecting it to be a considerable period of smooth sailing. The door for future rate hikes still sits ajar, and the MPC will likely remain vigilant for further fluctuations and risks in the months ahead.” PETER DOHERTY, DIRECTOR, HEAD OF INVESTMENT RESEARCH, ARBUTHNOT LATHAM, LONDON: “Of all the major central banks, the BoE has the toughest path forward. Economic data is cooling, the labour market is tight, but inflation is still sticky.” “In the short to medium term the ability of the (U.S.) Federal Reserve to hike relative to the BoE constrains the pound against the dollar.” “When you look back a couple of months, what was priced in was continued hikes from the BoE and cuts next year from the Fed. What might turn out could be very much the opposite of that.” GEORGINA TAYLOR, FUND MANAGER AND HEAD OF MULTI-ASSET STRATEGIES, INVESCO, LONDON:”Given we are probably at peak rates, we have to line up the central banks in terms of who might move to cuts and we think probably the Bank of England will need to be the one major central bank that moves first. They need to focus on the growth-inflation mix and the fact the economy is deteriorating.””Across bond markets, gilts are the place where there is probably most value coming through so we have added some exposure.” More

LONDON (Reuters) -The Bank of England held interest rates at a 15-year peak on Thursday and said it did not expect to cut them any time soon as it fights to “squeeze out of the system” the highest inflation of the world’s big rich economies.Despite publishing forecasts which show the British economy skirting close to a recession and flat-lining in the coming years, the BoE held Bank Rate at 5.25% for the second meeting in a row after 14 back-to-back increases.It also reinforced its message that borrowing costs were set to stay high – sending the pound modestly higher against the euro and dollar – even though only about half of the impact of its long run of rate hikes has been felt in the economy so far.The Monetary Policy Committee (MPC) voted 6-3 to keep the benchmark rate on hold, in line with expectations in a Reuters poll of economists. “The MPC’s latest projections indicate that monetary policy is likely to need to be restrictive for an extended period of time,” the BoE said, adding that further tightening would be required if inflationary pressures persisted.In September, the British central bank had said rates would need to remain “sufficiently restrictive for sufficiently long.”Governor Andrew Bailey also tried to hammer home the message that inflation’s fall over the past year from its highest since the 1980s, and the weaker economic outlook, should not be seen as a sign that rate cuts might soon be on the table.”We will be watching closely to see if further increases in interest rates are needed,” he told a press conference. “But even if they are not needed, it is much too early to be thinking about rate cuts.””Let me be clear, there is absolutely no room for complacency. Inflation is still too high,” Bailey said. “We will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2% target.” The bank would keep monetary policy restrictive only for long enough to “squeeze inflation out of the system”, however. The decision to keep rates on hold echoed recent moves by the European Central Bank and the U.S. Federal Reserve. They are also waiting to see if their strong dose of rate hike medicine will curb the world’s worst outbreak of inflation in decades.”The MPC opts for a hawkish hold,” said Yael Selfin, chief economist at KPMG UK. “We expect the Bank will look to ease policy towards the latter part of next year.”Bailey acknowledged the conflict in the Middle East created a risk of higher energy prices that could feed through into inflation, but said that had not happened so far. MPC members Megan Greene, Jonathan Haskel and Catherine Mann voted to raise rates to 5.5%. Sarah Breeden voted to keep rates on hold at her first meeting as an MPC member since replacing Jon Cunliffe.FLAT-LINING ECONOMYThe BoE has said it is determined to stamp out the risk of a damaging spiral of higher pay and prices.Although inflation has fallen from 11.1% just over a year ago to 6.7% in the most recent data, it remains more than three times the BoE’s 2% target. The central bank said it now expected Britain’s economy to have flat-lined in the July-September period and to grow by just 0.1% in the fourth quarter, with zero growth forecast for 2024 and an expansion of just 0.25% in 2025.But even so, inflation would only return to 2% at end of 2025, roughly six months later than previously forecast.Investors think the BoE has reached the end of its run of rate hikes, given the risk of a recession. In the run-up to Thursday’s announcement they were betting the BoE would keep interest rates on hold until at least August next year, when it would probably start to cut them. The BoE showed no sign that it was challenging those expectations: its forecasts on Thursday showed that, based on the market’s pricing for Bank Rate in the future, inflation would fall to its 2% target in two years’ time. The slowdown in the economy and the fading impact of last year’s gas price surge is likely to mean inflation resumes its fall soon. The BoE said it was likely to drop to 4.8% in October, almost two full points lower than in September.But the BoE is still keeping a close eye on strong wage growth which it fears could keep a flame under inflation.The central bank said there were “increasing uncertainties” about official data on the labour market, which has been hampered by low survey response rates, but that jobs growth was likely to have been weaker than it previously thought and the worryingly strong growth in wages was expected to cool off.The BoE forecast the unemployment rate would rise to 5% in two years’ time from around 4.2% now, based on the market’s path for interest rates. One detail in the BoE’s otherwise downbeat assessment of the economy is likely to be welcomed by Prime Minister Rishi Sunak.It predicted inflation of 4.6% in the fourth quarter of 2023 which would mean Sunak meets his pledge to voters to have price growth this year, ahead of a national election which is widely expected in 2024. More

WASHINGTON (Reuters) – The U.S. House of Representatives plans a vote on Thursday on a Republican plan to provide $14.3 billion in aid to Israel by cutting Internal Revenue Service (IRS) funding, setting up a clash with the Democratic-controlled Senate and White House.Republicans unveiled the bill on Monday, in the first major legislative action under new Speaker Mike Johnson, despite President Joe Biden’s request for a broad $106 billion package including funding for Israel, Taiwan and Ukraine, as well as humanitarian aid.The bill will face its first test of support in a morning procedural vote, a hurdle it needs to clear before a final vote on passage later in the afternoon.Republicans have a 221-212 majority in the House, but Biden’s fellow Democrats control the Senate 51-49. To become law, the bill would have to pass both the House and Senate and be signed by Biden.The top Senate Democrat, Chuck Schumer, said the Republican bill would be dead on arrival in the upper chamber, even if it passed the House. The White House has threatened a veto.Democrats objected to cutting money for the IRS, saying it will increase the country’s budget deficit by cutting back on tax collection.They also said it was essential to continue to support Ukraine as it fights against a Russian invasion that began in February 2022. While Democrats and many Republicans still strongly support Ukraine, a smaller but vocal group of Republicans question sending more money to the government in Kyiv at a time of steep budget deficits.Congress has approved $113 billion for Ukraine since the invasion began.The non-partisan Congressional Budget Office on Wednesday said the IRS cuts and the Israel aid in the standalone bill would add nearly $30 billion to the U.S. budget deficit, currently estimated at $1.7 trillion. More

Rao underscored the necessity of mastering theoretical regulatory frameworks amidst the growing pool of regulators in India. He asserted that strict compliance with the Digital Personal Data Protection Act, 2023 is crucial, pressing financial institutions to implement robust data governance frameworks. This move is aimed at ensuring responsible data handling in an era increasingly defined by digital transactions and data security concerns.Furthermore, Rao pointed out grey areas in existing regulations that are often exploited by certain business models. He insisted on the importance of regulatory intervention to address these loopholes, reinforcing the need for a comprehensive and effective regulatory system.The proposed specialized institute aims to equip regulators with the necessary skills and knowledge to navigate complex regulatory landscapes. It is expected to play a pivotal role in shaping India’s regulatory future by fostering a culture of precision and foresight in drafting regulations.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More