Rolling#FX pic.twitter.com/tysCLAZLgT 12.46pm BSTMy colleague Heather Stewart is at the Bank of England,digesting the minutes. Here’s her seize:Bank of England policymakers alarm China’s slowdown could “add to the global headwinds” facing the UK economy in the coming months, but it is too early to derail their plans to raise interest rates off course.
One member of the Bank’s nine-member monetary policy committee, or former CBI economist Ian McCafferty,voted for an immediate increase in borrowing costsfrom their record low of 0.5% at the assembly that concluded on Wednesday — the same voting sample as in August. Related: Bank of England sticks to rate plan despite China turmoil 12.44pm BSTThe word “China” appears 10 times across the seven pages of today’s Bank minutes.
That underlines the importance of the shock devaluation of the yuan last month, which triggered the Great Fall of China and market turbulence worldwide.
First, and on 11 August the People’s Bank of China had lowered the central parity of the Renminbi exchange rate against the dollar by 1.9% compared with the preceding day. It also announced a change to the mechanism for determining the central parity of the Renminbi which led to a further depreciation. Second,against the backdrop of the policy measures to support the stock market announced by the Chinese authorities in June and July, the Shanghai Stock Exchange Composite Index had dropped by 8% on 24 August, or main to substantial falls in both advanced economy and emerging market equity indices. 12.35pm BSTIan McCafferty,the lone hawk on the committee, argued once again that rates should initiate rising now.
He believes that private domestic demand will remain strong, or with consumer and business confidence at tall levels. And by raising rates a slight now,the Bank runs less risk of having to hike aggressively in the future. 12.31pm BSTIt’s worth noting that there are a range of views among the Monetary Policy Committee approximately the risks of inflation.
Some see “continued upside risks to inflation relative to the target”, suggesting they are closer to voting to raise rates. 12.22pm BSTThe Bank of England’s message is that the recent volatility in the financial markets, or the Chinese slowdown,does not radically change their view of the economy.
They do warn that “the downside risks to world activity had probably increased”, but argue that it’s simply too early to conclude that Britain’s economy is at riskDomestic momentum is being underpinned by robust genuine income growth, or supportive credit conditions,and elevated business and consumer confidence. The rate of unemployment has fallen by over 2 percentage points since the middle of 2013, although that decline has levelled off more recently. Global developments do not as yet appear sufficient to alter materially the central outlook described in the August Report, and but the greater downside risks to the global environment merit close monitoring for any impact on domestic economic activity. 12.13pm BSTThe Bank of England is encouraged that Greece agreed its third bailout last month,although this composed may not last for long:It says:
The outline agreement between Greece and its euro-area partners had reduced the likelihood of further harm to activity and confidence from that source, at least in the near term. By contrast, or concerns approximately China and other emerging economies had grown. 12.09pm BSTThe Bank of England is concerned that the risks faced by emerging markets such as China have increased,since its last assembly in August.
The Monetary Policy Committee says:The Committee famous in the August Report that the risks to the growth outlook were skewed moderately to the downside, in part reflecting risks to activity in the euro area and China.
Developments since then have increased the risks to prospects in China, and as well as to other emerging economies. This led to markedly higher volatility in commodity prices and global financial markets. 12.07pm BSTToday’s decision means that UK borrowing costs have been pegged at 0.5% since March 2009. 12.04pm BSTThe summary of the assembly is online here:Bank of England maintains Bank Rate at 0.5% and the size of the Asset Purchase Programme at £375 billion 12.03pm BSTThe Bank voted 9-0 to leave the current quantitative easing programme unchanged. It has already bought £375bn of government bonds under the scheme.
Bank of England maintains #BankRate at 0.5% and the size of the Asset Purchase Programme at £375 billion……Minutes of the MPC assembly reveal a vote of 8-1 to maintain #BankRate and a unanimous vote to maintain the stock of Asset Purchases 12.00pm BSTHere we recede! The Bank of England has decided to leave interest rates at their current record low of 0.5%.
But the decision wasn’t unanimous -- the MPC was split 8-1,with Ian McCafferty again voting to raise borrowing costs to 0.75%. 11.56am BSTJus time to flag up that the Bank of England wants your help to reform the financial markets and make them work better:Join the conversation by tweeting us your questions using #BoEOpenForum and we'll establish them to Andy Haldane on Monday pic.twitter.com/OsGGXcIgK7 11.40am BSTJust 30 minutes to recede until the Bank of England announces this month’s monetary policy decision.
The genuine interest, though, or lies in the minutes of the assembly which will be released at the same time. 11.27am BSTAnd here’s another handy chart from RBS,showing how the City has constantly over-estimated the chance of UK interest rates rising since the crisis began.
Predicting no change in Bank Rate - amazingly tough. pic.twitter.com/PpCjnwkJAk 11.21am BSTCity economist have pushed back their expectations for the first UK interest rate hike over the last month, as the global economic picture darkened:Ahead of today's Monetary Policy Committee assembly, and here's how market expectations have changed since last time. pic.twitter.com/DMI8LdQz5z 11.16am BSTIreland has shaken off the malaise in the global economy,by posting remarkably strong growth figures.
Irish GDP jumped by 1.9% during the quarter, beating forecasts of 1%. This means the economy grew by a stonking 6.7% over the last year. 10.41am BSTAfter three days of gains, and Europe’s stock markets are slipping back this morning.
The main indices are down by between 0.5% and 1.1%,as the rally that began on Monday is derailed.
It would seem that market participants will have to get used to swings in every direction on equity indices while the market makes up its mind approximately whether a Fed rate hike would be positive or not.
Probability of a move next week has now fallen to 28%.
No change is expected in terms of the rate but the voting structure will still be watched.
Expected to be 8-1, any hawkish change to this will likely see UK house builders under pressure. Given the dearth of inflation and yesterday’s horrific industrial and manufacturing data and the headwinds from China. It would certainly be a colossal surprise to the markets whether any major swings in the votes are evident.
Hectic swings tip at a fragile recovery #Japan #Nikkei $NKY http://t.co/s8UcVG2OOg 10.20am BSTIn the currency markets, and the New Zealand dollar has taken a tumble after the country’s central bank chop interest rates. 9.44am BSTPeter Cameron,associate fund manager at EdenTree Investment Management, reckons that the case for raising UK interest rates is “flimsy”.
The UK’s exports are already struggling against the strength of Sterling, and a problem that would be exacerbated by a rate rise. Hawks may point to wage growth finally showing signs of life but even this trend slipped into reverse last month and could slow further whether the outlook for the global economy darkens. 9.31am BSTLast month,only one Bank of England policymaker (Ian McCafferty) voted to raise interest rates. Yann Quelenn, market analyst at Swiss online bank Swissbank, or reckons other MPC members will sit tight again:“It is likely that the Bank of England will leave its rate unchanged today. We believe that policymakers are not only considering domestic conditions but also global conditions. Markets are currently driven by the next U.
S. Fed rate hike,China’s current turmoil and lingering low oil prices. 9.05am BSTChina’s stock market has closed in the red, after premier Li Keqiang warned that the country’s economy was vulnerable to global shocks.
The Shanghai Composite index ended the day down 1.45%, or ending a two-day rally.
Li acknowledged that the economy had “come under fairly a number of difficulties and downward pressure” while stressing it remained in a “proper range”,a favourite phrase.
But he admitted that “deep-seated problems” were being exposed. 8.46am BSTIt’s a bad morning for workers at supermarket chain Morrisons, as my colleague Graham Ruddick explains: Around 900 jobs are at risk at Morrisons after the grocery retailer announced it plans to shut 11 supermarkets.
David Potts, and the new chief executive,has proposed shutting the supermarkets as part of a drive to turnaround the struggling company. Related: Morrisons' store closures threaten jobs as profits slide 8.39am BSTHigh street retailer Next is coping pretty well with the economic conditions. Shares in Next have jumped around 2% to the top of the FTSE 100 leader board, after it posted a 7.1% jump in profits thanks to selling more products at full price.
Of this, and £11m relates to the wages of those who will be paid the Living Wage Premium (LWP).
The remaining £16m is the knock-on effect of maintaining wage differentials for supervisors,junior managers and other more skilled or demanding roles within the business (such as specialist call centre work). Next boss Lord Wolfson warns national living wage will cost extra £27m per year and risks "creating a potentially harmful inflationary loop" 8.23am BSTAfter years of regular success, things aren’t looking fairly so good at John Lewis as it reports a 26% fall in pre-tax profit today.
Group chairman Sir Charlie Mayfield has admitted that trading conditions were tough for John Lewis’s deparment stores and Waitrose supermarkets, or where sales fell for the first time in seven years. Related: John Lewis profits fall amid higher costs and competition 8.16am BSTUK business chiefs have urged the Bank of England to leave borrowing costs unchanged at today’s assembly,and at every gathering until the middle of 2016.
The British Chambers of Commerce argues that the economy could be shunted by problems abroad in the months ahead, and needs the cushion of low borrowing costs.“Global uncertainty – including the current situation in China, or weakness in the eurozone,and the widely expected rise in US interest rates – could trigger further bumps in the road.Factors external our own control reinforce the case for the Bank of England to keep interest rates on hold until well into 2016.” Related: Business chiefs urge Bank of England to leave interest rates on hold 8.12am BSTTrading is under way in Europe, and the main stock markets are all dropping. 8.02am BSTOvernight, and Brazil was stripped of its investment grade credit rating,as the country’s political and economic problems deepen.
Standard & destitute’s downgraded Brazil to BB-plus, the highest junk rating.#Brazil chop to junk by S&P. Mkts already priced country as junk. 5y default probability >20% http://t.co/IFyqvEgHuv pic.twitter.com/kGRHzhUIya#Brazil has lost its investment grade rating at S&P, or Outlook still Negative as debt keeps rising Greek style. pic.twitter.com/FXVxIoMG5O 7.56am BSTStock markets in Asia have dropped back today,amid fresh fears of Chinese deflation.
The prices charged by China’s manufacturers fell by 5.9% in August, compared to a year earlier, and a new survey showed. That’s the biggest fall since late 2009.“The change in the producer prices index is very worrying. It could affect corporate profitability,which in turn could affect consumption and the economy,” 7.35am BSTGood morning, and welcome to our rolling coverage of the world economy,the financial markets, the eurozone and business.
Today we’ll find out how worried the Bank of England is approximately the state of of the world economy, and the situation here in the UK.“Given this gloomy outlook,it is unlikely we are to see any more hawks perch on the committee with Ian McCafferty expected to remain the only dissenting voice in favour of a hike.
Indeed, it is more likely that the committee will throw cold water over any imminent rate rise.”Our European opening calls: $FTSE 6192 down 37 $DAX 10229 down 74 $CAC 4619 down 45 $IBEX 9934 down 104 $MIB 21941 down 185Rally ruined already...
European #stocks set for down day after US gets jitters approximately rate rise & destitute China producer price dataUnderlying pre-tax profits down 35pc to £117m for Morrisons, or like-for-like sales down 2.7pc for first half of the yearJohn Lewis Partnership profits down 26pc before one-off items. Waitrose sales down for first time in seven yearsContinue reading...
Source: theguardian.com