Nearly all economists had expected the BoE to cut rates and many also expected it to resume its multi-billion-pound program of government bond purchases.
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Yvonne Braun of the ABI said: “While we recognise there are wider economic judgements underlying this decision, continued low interest rates and sustained quantitative easing are the main factors keeping annuity rates low”. Carney insisted that subzero interest rates were not being considered.
The British pound edged lower on Thursday as investors anticipated the Bank of England would cut interest rates to a record low later in the session, while a rebound in oil prices from four-month lows lifted Asian stocks.
The rate cut was widely expected, but the Bank caught many investors off guard by signalling it expects to reduce rates even further – to a “little above zero” – later this year. Since then, central banks have unleashed an unprecedented era of easy money, yet inflation remains disturbingly low and growth frustratingly weak across major economies.
The Labor Department said applications for unemployment aid rose to 269,000 last week, a level close to historical lows and a positive sign for the job market. Risk aversion and global anxiety has lessened the impact of even the biggest economic indicator in global markets. Annual income from annuities has already plummeted since rates were cut to 0.5 per cent in March 2009.
That may still be too optimistic. The stock rose $1.08, or 10.3 percent, to $11.52. However I don’t see this making any real difference to Bristol or local economies across the country. While the full fallout hasn’t yet shown up in official data, initial reports show confidence has slumped and industry surveys have weakened.
The central bank slashed its growth forecasts from next year onwards, underscoring the contraction underway.
As for this year, the BoE has warned there will be “little growth in GDP [gross domestic product] in the second half of the year”. Silver had risen to US$20.39 while platinum eased US$6 to US$1,153.
‘The MPC has been conservative in its interpretation of these data, producing a forecast stronger than historical relationships would have implied.
BoE expects a trade-off between delivering inflation at the target and stabilising activity around potential.
However, would that be enough to push the Pound lower?
Hammond hinted action was possible, saying in a letter to Carney on Thursday that he was “prepared to take any necessary steps to support the economy and promote confidence”.
“Message one: it is up to the government to implement a ‘comprehensive productivity plan.’ Furthermore, the Bank has severely downgraded its expectations for business investment over the next couple of years”, she said.
The BOE said while it hadn’t made any assumptions about the outcome of the government’s Brexit negotiations or any new trade deals, its forecasts were conditioned on a gradual worsening of the economy’s openness.
The Dow Jones industrial average lost 25 points, or 0.1 percent, to 18,330 as of 2:22 p.m. Eastern time. The changes will start from September for existing customers.
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The FTSE 250, which is home to a larger proportion of companies that are truly domestically focused, also rallied on the day, with companies taking comfort from the prospect of a cash injection from the Bank of England’s new corporate bond buying programme.
