Gold logs a modest gain as Bank of England rolls out stimulus

The BoE meanwhile maintained its 2.0-percent economic growth forecast for 2016.

The Bank of England’s forecasts for lower growth have the financial markets believing there is more stimulus to come. The cut in bank rate and the measure meant to ensure banks passed it on to consumers – known as the term funding scheme – gained unanimous support.

There had been some doubts in the past few days that the data picture may not have given the Bank enough insight for them to begin a policy of stimulus; these were wrong and the combination of interest rate cuts, quantitative easing spending, including a corporate bond buying program, and a new funding scheme for banks make this a policy toolkit that is set to dig the United Kingdom economy out of any mire it may fall into as quickly as possible. The Dow Jones Industrial Average plumbed in eight of the past nine days and seven days straight.

In initial trade, London’s FTSE 100 index rose 0.4 percent to 6,764.35 points, after the BoE halved rates on Thursday to a record-low 0.25 percent. The British central bank also unveiled a raft of stimulus measures that include resuming a bond-buying program to pump money into the economy and offering cheap loans to banks.

Partly as an effect of the monetary expansion and earlier Sterling weakening after the Brexit vote the inflation rate is predicted to increase to around 2.5% in the medium term, indicating that the governing council will be very tolerant to any inflation impulse created by the depreciating exchange rate. The Labor Department said Thursday applications for unemployment aid rose to 269,000 last week, a level close to historical lows and a positive sign for the job market. That suggests the economy could fall into – or close to – recession, defined as two consecutive quarters of economic contraction. While it still predicts 2 percent growth this year, it slashed its forecast for next year to just 0.8 percent from its May estimate of 2.3 percent.

But with bets against sterling already at their highest on record, weakening the currency has proved a hard road for speculative investors over the past month, and it remains more than 3 cents above lows hit in early July.

“Today’s interest rate cut was therefore widely anticipated, although the package of additional measures to support the economy is more significant in scope than what markets had priced in”.

Hong Kong’s Hang Seng gained 1.3 percent to 22,111.84 and Sydney’s S&P-ASX 200 added 0.6 percent to 5,509.50.

Benchmark US crude rose 1.10 dollars (83p), or 2.7%, to 41.93 dollars (£31.99) a barrel in NY after a 3% climb on Wednesday.

In other energy trading, wholesale gasoline rose 2 cents to $1.37 a gallon.

Japan’s Nikkei rose 0.6 percent from Wednesday’s three-week lows. China’s CSI 300 index gained 0.2 per cent, and the Shanghai Composite advanced 0.1 per cent.

The yen held steady at 101.20 per dollar, not far from Tuesday’s three-week high of 100.68 to the dollar.

Brent crude, a benchmark for Global oil prices, added 1.19 dollars (90p), or 2.8%, to 44.29 dollars (£33.79) a barrel in London.