Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Like Supreme Court justices, central bankers have been the ‘adults in the room’ during these times of economic upheaval.
So, after an intriguing Federal Reserve meeting last night, its the Bank of England’s turn in the spotlight today, with the Bank of Japan having already acted overnight – leaving rates on hold.
The BoE is widely expected to leave interest rates unchanged, while it awaits some clarity on Brexit. Yesterday’s drop in inflation, to a three-year low of 1.7%, is no reason to cut borrowing costs, while a rate hike would hurt an already-nervous economy.
The minutes of today’s meeting, also released at noon, will show the BoE’s concerns about Brexit preparedness and the state of the UK. A gloomy outlook could move the pound.
Ipek Ozkardeskaya, senior market analyst at London Capital Group, says:
The Bank of England (BoE) is expected to maintain its monetary policy unchanged at today’s meeting, as Governor Mark Carney will continue assuming an orderly Brexit while keeping an eye on the looming downside risks.
With the worst Brexit scenarios fully priced in, the pound traders could find interesting dip-buying opportunities below the 1.25 level against the US dollar. A negative outcome regarding Johnson’s parliament suspension could send the pound rallying past $1.25.
Before the BoE’s big moment we get new UK retail sales figures. Due at 9.30am, they are expected to show a slowdown in spending.
And while Mark Carney does have a tough job, at least he needn’t worry about being labelled gutless by the prime minister.
Last night, Fed chair Jerome Powell earned another blast from Donald Trump after announcing a small cut in interest rate — too small for the president. In response, Powell hinted that the US Economic would be in a better state without the president’s trade wars.
The Fed’s decision wasn’t unanimous – while 7 governors voted in favour, two opposed any cut while one wanted a deeper move. The FOMC was also remarkably split over the future path of interest rates. Some think they’re done cutting for the year, others expect more easing, and a third group think rates are going up again soon.
The markets initially concluded that the Fed was disappointingly hawkish (sending shares down and the dollar up), but this move later reversed as Powell spoke about being prepared to act aggressively if needed.
So, lots for investors to ponder today, with the weekly US jobless report
- 9.30am BST: UK retail sales for August
- 12pm BST: Bank of England interest rate decision
- 1.30pm BST: US weekly jobless report
- 3pm BST: US home sales report for August