Economy

Here’s what Bank of England officials said in a press conference following that decision:BANK OF ENGLAND GOVERNOR ANDREW BAILEYOn the U.S. election result:”We’ll watch it very closely… I’m not going to make any presumptions about what will happen, because I don’t think that’s either a) consistent with our policy remit or b) wise, frankly. I think let’s see what happens.” “We will no doubt over time be able to get a better sense of a) what the policies are and then b) how they might affect the UK economy, and of course we’ll do that. But… I don’t think it’s useful or wise to enter into speculation (as to) what they might be, because we just don’t know.””We work with all U.S. administrations … We will look forward to working with the new U.S. administration. We worked with the previous Trump administration. We work with the current administration.””That’s what we do. We do it without any … presumptions and we will do that constructively.”On the Oct. 30 budget:”We provisionally expect the measures announced in the budget to boost the level of GDP by around three quarters of a percent at their peak in a year’s time. This reflects the stronger and relatively front-loaded paths for government consumption and investment, more than offsetting the impact on growth of higher taxes. “Overall, fiscal policy is still expected to tighten over the forecast, but all else equal, the changes announced in the budget are expected to reduce the margin of spare capacity in the economy over the forecast period.”On the impact of the budget on interest rates:”I don’t think that it’s sensible to conclude that the path of interest rates will be particularly different.”On inflation:”We still need to see services price inflation come down more broadly to keep headline consumer price inflation at the 2% target.”On the labour market:”Developments in the UK labour market continue to be very important for assessing developments in inflationary pressures. There are mixed signals from the data. On global risks:”We do have to watch very carefully the fragmentation of the world economy.”There are a lot of risks attached to the fragmentation of the world economy … let’s see what happens. It’s too early to judge.” More

LONDON (Reuters) – The Bank of England cut interest rates on Thursday for only the second time since 2020 and said future reductions were likely to be gradual, as it saw higher inflation and economic growth after the new government’s first budget.The Monetary Policy Committee voted 8-1 to cut interest rates to 4.75% from 5%, a stronger majority than expectations in a Reuters poll for a 7-2 vote in favour of a cut. Catherine Mann dissented, preferring to keep rates on hold.Sterling rose by almost half a cent against the U.S. dollar immediately after the announcement. British government bond prices fell but quickly reversed that drop.”We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much,” BoE Governor Andrew Bailey said in a statement.”But if the economy evolves as we expect it’s likely that interest rates will continue to fall gradually from here,” he added, broadly echoing his language after September’s meeting.The BoE predicted that finance minister Rachel Reeves’ budget announced last week – which entails big increases in tax, spending and borrowing – would boost the size of Britain’s economy by around 0.75% next year but barely improve annual growth rates in two or three years’ time.Her plan was likely to add just under half a percentage point to the rate of inflation at its peak in just over two years’ time, the BoE said, causing inflation to take a year longer to return sustainably to its 2% target.Reeves said families would welcome the BoE’s rate cut.The BoE’s cautious language on the future interest rate cuts was similar to previous months, in keeping with investors’ view that it is likely to cut interest rates more slowly than the European Central Bank. The BoE did not refer to Donald Trump’s U.S. election victory, which has prompted a big reduction in bets that the Federal Reserve will cut interest rates aggressively.The Fed is expected to reduce its benchmark policy rate by quarter of a percentage point later on Thursday. After the BoE’s rate cut, financial markets priced only around two interest rate cuts from the BoE in 2025 – compared with between two and three beforehand and down from around four before the budget.The BoE said inflation was likely to rise to around 2.5% by the end of this year from 1.7% in September and hit 2.7% by the end of next year, before falling gradually below its 2% target by the end of the three-year forecast. Government decisions to raise the cap on bus fares, hike value-added tax on private school fees and increase employers’ social security contributions were likely to boost inflation. With the latter measure combining with a 6.7% hike in the national minimum wage, the BoE said employers faced rising costs – although it could not be certain of the overall effect on inflation as employers might respond by sacking staff or accepting lower profits. Two of Britain’s biggest businesses, BT and Sainsbury (LON:SBRY)’s, said on Thursday that tax changes in the budget would fuel inflation.While the BoE downgraded its forecast for average economic growth this year to 1% from 1.25%, reflecting recent revisions to past growth, it raised its forecast for 2025 to 1.5% from 1%. “This reflects the stronger, and relatively front-loaded, paths for government consumption and investment more than offsetting the impact on growth of higher taxes,” the BoE said.While the BoE’s forecasts for growth and inflation include the impact of higher spending and taxes, they do not include the effect of a big rise in market borrowing costs since the budget as it set those assumptions beforehand and did not update them.If the now-higher market interest rates were factored in, the outlook for inflation and growth would likely be a bit lower. The BoE repeated its message that monetary policy would need to stay “restrictive for sufficiently long” to return inflation sustainably to the 2% target. More

Wealthy customers continue to splurge on high-end leather handbags and Polo sweat-shirts, boosting demand across Ralph’s direct-to-customer channels and helping it counter a muted wholesale business and soft e-commerce sales in North America. The results are in contrast to a pullback in the broader luxury sector, primarily in the key China market, which has hurt larger European fashion houses such as Hugo Boss (ETR:BOSSn), Kering (EPA:PRTP) and luxury bellwether LVMH. The Club Monaco owner now expects fiscal year 2025 revenue to increase about 3% to 4% compared with a prior forecast of a 2% to 3% rise.The luxury retailer’s net revenue rose 6% to $1.73 billion in the second quarter ended Sept. 28 from a year earlier. Analysts on average had expected revenue of $1.68 billion, according to data compiled by LSEG. More

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Donald Trump’s election victory marks a historic return to the White House – an extraordinary political comeback that is likely to have seismic ramifications for the global economy.
The former president’s litany of campaign pledges include steep tariffs, tax cuts, deregulation and a push to withdraw from key global agreements.
Oxford Economics’s Ben May said the direct impact of Trump 2.0 on global growth could be limited in the near term, “but masks major implications for trade and the composition of growth, and for financial markets.”

A worker is making textile export orders at a production workshop of a textile enterprise in Binzhou, China, on July 8, 2024.
Nurphoto | Nurphoto | Getty Images

Donald Trump’s election victory over Vice President Kamala Harris marks a historic return to the White House — an extraordinary political comeback that is likely to have seismic ramifications for the global economy.
Speaking to his supporters in Florida early Wednesday, Trump said an “unprecedented and powerful mandate” would usher in “the golden age of America.”

The former president’s litany of campaign pledges include steep tariffs, tax cuts, deregulation and a push to withdraw from key global agreements.
Analysts say it is hard to pin down the extent to which Trump will seek to implement these measures in his second four-year term, but the consequences of any will have clear repercussions across the globe.
Lizzy Galbraith, political economist at asset manager Abrdn, said it remains to be seen exactly what style of presidency investors can expect when Trump returns to the White House.
“Congress has a really big part to play in this,” Galbraith told CNBC’s “Squawk Box Europe” on Thursday.

“If Trump does have unified control of Congress, as is looking very likely and is what we expect to happen over the next few weeks and days, then he does have greater latitude to implement his tax-cutting agenda, his deregulatory agenda, for example, but we are also likely to see elements of his trade policy sitting alongside that.”

On tariffs, Galbraith said there were currently two schools of thought. Either Trump seeks to use them as a bargaining tool to gain concessions from other parties — or he delivers on his promise and implements them much more broadly.

Trump’s favorite word

Trump has previously described “tariff” as his favorite word, calling it “the most beautiful word in the dictionary.”
In an effort to raise revenues, Trump has suggested he could impose a blanket 20% tariff on all goods imported into the U.S., with a tariff of up to 60% for Chinese products and one as high as 2,000% on vehicles built in Mexico.
For the European Union, meanwhile, Trump has said the 27-nation bloc will pay a “big price” for not buying enough American exports.

Former US President Donald Trump arrives during a “Get Out The Vote” rally in Greensboro, North Carolina, US, on Saturday, March 2, 2024.
Bloomberg | Bloomberg | Getty Images

“Now, I think it is worth pointing out that we do think that in any situation which Trump is using tariffs quite often, his principal focus is going to be on China. And we don’t see Trump’s secondary tariff pledge — that baseline tariff, which would hurt European companies — as being all that feasible,” Galbraith said.
“So, it’s not necessarily our base case that you see something like a baseline tariff applied that would really hurt European goods although there is still a distinct possibility there that specific European products could be affected,” she added.
Analysts have warned that Trump’s plan to impose universal tariffs are highly likely to raise prices for consumers and slow spending.

Europe

Ben May, director of global macro research at Oxford Economics, said the direct impact of Trump 2.0 on economic growth is likely to be limited in the near term, “but masks major implications for trade and the composition of growth, and for financial markets.”
For instance, May said that in a scenario in which the more radical aspects of Trump’s policy agenda are adopted, particularly on tariffs, the impact across the globe will be “very sizable.”
“A key unknown is whether a clean sweep raises the risk that a Trump administration will push through more extreme policy measures, such as larger, less-targeted tariffs,” May said in a research note.
“Uncertainty over Trump’s stance on the conflicts in Ukraine and the Middle East also adds to the risk of greater instability in both regions, which could take a toll on regional, and even global, growth,” he added.

The prospect of a second Trump presidency had long been viewed as negative for Europe and the European Union more broadly.
Yet, analysts at Signum Global Advisors said in a research note on Wednesday that “the magnitude of that truth remains underappreciated.”
Indeed, they argued that several factors mean the EU is likely to be “the biggest loser of a second Trump era,” citing trade tensions, an ongoing frustration with key European policy decisions and Trump’s likely desire to double down on America’s advantage at attracting capital relocation.

Asia

Analysts at Macquarie Group said Thursday that, at face value, Trump’s election victory is “bad news for Asia,” particularly China, but the region is “more prepared” than in 2016, when he first moved into the White House.

A cargo ship is sailing towards the docking of a foreign trade container terminal in Qingdao Port, Shandong province, in Qingdao, China, on June 7, 2024.
Costfoto | Nurphoto | Getty Images

“A key tenet of Trump’s campaign was higher tariffs. While well telegraphed, the headwinds that are likely to sweep across Asia, particularly China, should spike volatility and compress multiples as uncertainty prevails,” analyst at Macquarie Group said in a research note.
“A counter-balance to this is a likely acceleration in China stimulus measures,” they added. “The Chinese government has already outlined its ambitions to support economic growth at the 5% level and address property market woes to support domestic consumer confidence.”
Mitchell Reiss, an American diplomat and distinguished fellow at the Royal United Services Institute (RUSI) think tank, said there are likely to be some differences to the Trump playbook this time round.

“I think that President-elect Trump has said that he would like to increase tariffs on China again until the playing field is level, in his view,” Reiss told CNBC’s “Squawk Box Europe” on Thursday.
“What was interesting the last time when Trump won was the number of China hawks that staffed his administration. This was a very tough administration in terms of personnel and in terms of their view of how they saw China as an adversary, expansionist in the South China Sea and contrary to American values and friends and allies around the world,” he continued.
“So, I don’t think that that’s going to change. I think that might be mitigated a bit by the economic interaction that we have with China, but I think that it is going to be a complicated relationship going forward.” More

LONDON (Reuters) – The amount of finance provided to developing countries to help them adapt to the impacts of climate change is far short of the $359 billion a year needed even after the biggest annual increase yet, a U.N. report on Thursday showed.Funding from the developed world hit $28 billion in 2022 after a $6 billion rise, the most in any one year since the U.N. Paris deal in 2015 to try and limit the impacts of global warming, the annual U.N. Environment Programme report said.Countries are preparing to meet in Azerbaijan at COP29 from Nov. 11-22 for the next round of climate talks in a year marked by extreme weather aggravated by climate change, including floods in Bangladesh and drought in Brazil.How much money richer countries agree to send to developing countries to help them cope is expected to be central to the talks in Baku.”Climate change is already devastating communities across the world, particularly the most poor and vulnerable. Raging storms are flattening homes, wildfires are wiping out forests, and land degradation and drought are degrading landscapes,” UNEP Executive Director Inger Andersen said in a statement.”Without action, this is a preview of what our future holds and why there simply is no excuse for the world not to get serious about adaptation, now.”Adaptation finance covers activities including building flood defences against rising sea levels, planting trees in urban areas to protect against extreme heat and ensuring infrastructure can withstand hurricanes.In addition to the finance, countries need guidance on how to use it.While 171 countries have a policy, strategy or plan in place, the quality varies, and a small number of fragile or conflict-affected states have none, the report said.A separate U.N. report last month said the world was on track to exceed its goal of limiting warming to 1.5 degrees Celsius (2.7 Fahrenheit) above the pre-industrial average by 2050, and instead head for warming of 2.6-3.1C. More

Policymakers voted 8 to 1 to cut the Bank Rate by 25 basis points to 4.75%, helped by the consumer inflation figures for September surprising to the downside, falling below its own August projections. The BoE also trimmed interest rates by 25 basis points in August, its first cut since the pandemic in 2020.“It would be an understatement to say that a lot has happened since the Bank of England’s last rate decision,” said analysts at Deutsche Bank, in a note. “The last few weeks or so have seen: a dovish signal on rates from the BoE governor, a large downside domestic inflation surprise, a more expansionary than expected Budget, and the US election on top.”Aside from the data, and with the full impact of the US election unlikely to be felt until next year, it’s the Budget that is creating the biggest uncertainty over the likelihood of further rate reductions.“Despite the substantial tax increases, [the Budget] was on balance net expansionary implying looser fiscal stance than was previously expected,” said analysts at UBS, in a note. “The OBR’s assessment of the treasury’s policies also suggested a positive impact on near-term growth and, importantly, inflation. However, the Bank will conduct its own assessment of the announced fiscal measures, which might differ from the OBR’s,” UBS added.The Swiss bank now looks for the November cut to be followed by a pause in December. “On the one hand, a more pronounced moderation in headline and, importantly, services inflation, could justify a faster pace of rate cuts (i.e. cutting in December). On the other hand, some of the progress seen in the data could be offset by the inflationary impact of the Budget, depending on the Bank’s assessment,” UBS added.A December rate cut has become less likely, analysts at ING agreed, although they feel a lot hinges on the two inflation reports due before Christmas.“Last week’s budget has made life more complicated for the Bank of England,” analysts at ING said, in a note. “The combination of extra fiscal stimulus and a volatile US election aftermath means officials won’t want to comment on its next steps.” More