Instant view: Bank of England leaves rates at 5%
2024.09.19 08:01
LONDON (Reuters) – The Bank of England left interest rates at 5% on Thursday and voted to run down its stock of British government bonds by another 100 billion pounds ($132.86 billion) over the coming 12 months, weighing on the government’s finances.
The Monetary Policy Committee voted 8-1 to keep rates on hold, with only external member Swati Dhingra voting for a further quarter-point rate cut after the BoE last month delivered its first reduction to borrowing costs since 2020.
Sterling rose after the decision to $1.3290 compared to $1.3266 just before the decision and was around 0.3% higher against the euro at 83.95 pence. British government bond yields rose, while London’s stock index trimmed its gains.
COMMENTS:
LINDSAY JAMES, INVESTMENT STRATEGIST, QUILTER INVESTORS, LONDON:
“A rate cut would have been especially welcomed by consumers and businesses alike, given the economy remains close to stall speed. Having had a positive and rather buoyant first half of 2024, dark clouds are gathering once again and, as such, action from the BoE will be required sooner rather than later.”
CHRIS SCICLUNA, HEAD OF ECONOMIC RESEARCH, DAIWA CAPITAL MARKETS, LONDON:
“We’re likely to get a rate cut in November and then it’s a case of whether they move by 25 bps at every meeting, or once a quarter.”
“The 100 billion pound QT announcement was in line with expectations, which means the level of central bank reserves should be close to levels the BOE thinks is in line with the equilibrium.”
RUPERT WATSON, GLOBAL HEAD OF MACRO AND DYNAMIC ASSET ALLOCATION, MERCER, LONDON:
“In light of sticky inflation data showing it falling, but still higher than target, the Bank of England kept interest rates unchanged.”
“They have signalled cuts are on the horizon as the trend for wage growth and inflation is moving in the right direction. We think the UK economy is landing softly freeing up the BoE to cut rates over the next 6-12 months towards 3.5%.”
FRANCES HAQUE, UK CHIEF ECONOMIST, SANTANDER, LONDON:
“Today’s call to hold was expected given the comments made by Governor Bailey at the August meeting, ‘that the bank must not cut rates too quickly or by too much’.”
“There has been positive news on wage growth – a determining factor in whether inflation will remain at target level – with this continuing to slow in July and with private-sector wage growth coming in line with the Bank of England’s forecast for Q3 of 4.7%. Inflation figures out on Wednesday showed headline inflation sticking at 2.2%, but with services inflation increasing 0.4% month on month – albeit that was just below the Bank’s forecast of 5.8% for August. This all suggests that a slow and steady pace will be maintained for future rate cuts.”
($1 = 0.7527 pounds)
