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BOE leaves bank rate unchanged at 0.75%

BoE rate decision

BoE rate decision
Vote hike: 0

Vote unchanged: 7
Vote cut: 2

  • Saunders and Haskell voted for cut.
  • Saunders and Haskell say stimulus needed now as data suggests labour market turning and sees downside risks from Global economy
  • UK economy likely to be 1% smaller by Q4 2022 than expected in August forecasts
  • Saunders and Haskell wanted to cut rates to 0.50% from 0.75%
  • Inflation in one years time seen at 1.51% (Aug 1.90%), two years time (2.03% Aug 2.23%) and three years time 2.25% (Aug 2.37%)
  • Market rates imply more BoE loosening than in Aug point to bank rate at 0.5% in 2022
  • BoE MP report shows unemployment rate at 3.8% in two years time (Aug 3.7%)
  • Risks to UK GDO growth skewed to the downside in 2nd and 3rd years of forecast horizon
  • BoE forecast sees inflation bottoming oil at 1.2% in Q2 and Q3 2020 due to lower oil prices, regulatory caps on domestic electricity and water bills
  • Almost all UK firms surveyed by the BoE said that they are ‘fully ready’ or ‘as ready as they can be’ for Brexit
In an initial reaction to the two dissenters who voted for rate cuts the GBP has fallen. The slight dovish shift is not a huge surprise, but it is unexpected. Hence the fall in the GBP. Slowing growth, slowing inflation are common themes across the globe. I would expect the GBP to be pressured now for the rest of the session.

Full BoE rate text here

(more…)

France, Britain and Germany have set up a scheme to continue trading with Iran

The scheme is not new news but it will be tested for the first time soon by France.

Instex is a barter trade mechanism
  • It aims to avoid direct financial transfers with iran
  • Sets up offsetting balances between importers and exporters on the European side
  • The making continuing trade possible between European Union members and Iran in the face of U.S sanctions
French Finance Minister Bruno Le Maire said (overnight Thursday) he hoped the first transaction would be completed in coming days.
There’s always a loophole …
The scheme is not new news but it will be tested for the first time soon by France.