Bank of England set to stick with rate cut signal despite Brexit bounce
The Bank of England is expected to say on Thursday that it will still probably cut interest rates to a fraction above zero later this year, despite signs it overestimated the initial shock to Britain's economy from June's Brexit vote.
The BoE's nine rate-setters probably voted unanimously at their September meeting to keep Bank Rate at 0.25 percent, the lowest level in the BoE's 322-year history, according to a Reuters poll of economists.
The Bank will probably also signal that a further cut is likely the next time it meets, in November, as it to tries to help the economy cope with the referendum decision in June to leave the European Union.
While all economists surveyed by Bloomberg predict the central bank will keep its key rate and asset-purchase target unchanged on Thursday.
Clues as to whether officials are shifting their stance will be closely scrutinized, after the Monetary Policy Committee last month raised the possibility of further stimulus before the end of the year.
In August, most officials expected “to support a further cut in bank rate” this year, should their slowdown predictions materialize, minutes of their discussions showed. Sixteen of 22 economists in a Bloomberg survey predict the line will be repeated this month.
Britain to narrowly dodge recession as economy flatlines: Reuters poll
Britain is now expected to narrowly dodge a mild recession that was widely predicted after the country voted to leave the European Union, but the government will still need to add fiscal stimulus to support growth, a Reuters poll found.
But as the likely date of that first move has been pushed off until early next year or later, a survey of around 70 analysts taken in the past few days shows many have tempered their views.
They gave a median 35 percent chance of a recession in the coming year, down from 60 percent in a July poll.
But growth will be weaker than if Britons had voted to remain in the bloc. The economy will grow 1.7 percent this year and 0.7 percent next, still sharply lower than the respective 1.9 and 2.1 percent forecasts given in a June poll based on assumptions the country would vote to remain in the EU.
In an August poll GDP was forecast to contract a mild 0.1 percent this quarter and next, but the latest prediction is for no growth this quarter and a 0.1 percent expansion next.
Fed Deluge of Dots and Discord Leaves Global Markets Baffled
The U.S. Federal Reserve’s decision next week on whether to raise interest rates is a vital issue for markets and investors around the world. Problem is, all the speeches, forecasts, meeting minutes, press conferences and media interviews given by Fed officials in the lead up is muddying, not clarifying, the outlook.
Case in point: Boston Fed President Eric Rosengren on Sept. 9 said the economy could overheat if they waited too long to raise interest rates, contributing to a 2.5 percent rout in the S&P 500 Index that was the biggest move since the U.K.’s vote to leave the European Union. Three days later, Fed Governor Lael Brainard argued there’s no rush to tighten, helping lift the S&P 500 by 1.5 percent in the equity benchmark’s biggest one-day reversal since January.
“To say the Fed is confusing is an understatement,” said Hao Hong, chief China strategist at Bocom International Holdings Co. in Hong Kong. "The more speeches, the more room for confusion."
Crude oil rose 0.2 percent
Crude oil rose 0.2 percent to $43.66 a barrel, following a two-day slide of almost 6 percent. Libya and Nigeria, two OPEC members whose supplies have been crushed by domestic conflicts, are preparing to add hundreds of thousands of barrels to world markets within weeks. U.S. data showed crude stockpiles fell 559,000 barrels last week, compared with a 4 million gain forecast in a Bloomberg survey.
Reference: Bloomberg, Reuters
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