Bank of England will set UK interest rates after Fed starts easing stimulus – business live

Good morning, and welcome to our rolling coverage of the world economy, financial markets, the eurozone and trade.

Will happen bank of england Raised interest rates today for the first time since the pandemic? And should they?

This month’s monetary policy decision is on a knife-edge, as policymakers weigh whether to increase borrowing costs now in an effort to slow inflation.

With inflation expected to rise to over 4% (twice the bank’s target) soon, many city economists predict the Monetary Policy Committee will raise the bank rate today 0.25%, up from the current record low of 0.1%.

But others argue that the MPC will remain closed till the December meeting. Until then, they will have data showing whether ending the furlough job protection scheme this autumn has caused unemployment to rise.

A rate hike can ease inflationary pressures, raise the cost of borrowing on credit, and also raise mortgage costs for people who aren’t into fixed-rate deals – at a time when rising energy costs were the first. It’s been squeezing homes ever since.

It could also undermine economic recovery, at a time when supply chain problems are already weighing on growth.

As Laith Khalaf |head of investment analysis AJ Bell, keep this:

The bank may decide that pouring more cold water on the situation at this time may result in economic stagnation.

We know MPC members are divided on this issue. Hawkish michael saunders Last month warned households to prepare for interest rate hikes “long enough”.

Governor Andrew Bailey Speculation of an interest rate hike resumed in October, saying the Bank of England will ‘have to act’ if it sees medium-term inflation and risks to medium-term inflation expectations.

but silvana tenrero Argued recently that the bank should stop, because some of the factors driving inflation such as a shortage of raw materials and rising gas prices are temporary – so rate hikes could be “self-defeating”. Katherine Mannu, who recently joined the committee, also argues that the bank can wait.

Refinitiv estimates based on interest rate futures show today’s rate hike of around 63%, so it could be a brisk morning in the city.

Matthew Ryan, senior market analyst ebury, predicts an increase in the cost of borrowing.

“We still think hawkers will win the day, and push through a 15 basis point increase in rates to 0.25% this week, although we have a little less confidence in this outlook than we did a week or so ago.

We would then expect an additional 25 basis points move in February, depending on the tone of the bank’s communication on Thursday afternoon.

but Thomas Pugh, economist for rsm UK, predicts that the bank will oppose rate hikes, narrowly…

“Markets have started anticipating the start of the long haul for interest rates to normalise. At Thursday’s Monetary Policy Committee (MPC) meeting, the Bank of England (BoE) is pricing in a 63% chance of a rate hike and a total of four hikes over the next 12 months.

‘But at a 63% chance, it’s still a close call. We expect the vote to be 5v4 in favor of leaving interest rates at 0.1%. This could mean a glass half-empty/half-full policy of keeping the BoE rate at near-zero for another MPC meeting, with further guidance preparing markets for a rate hike in December or early 2022. Doing.

The bank will also release its latest economic forecast this afternoon.

Last night the US central bank began to ease its stimulus package, cutting its $120/month bond purchases by $15bn a month.

But the Federal Reserve also insisted it was too early to start raising interest rates.

Chair Jerome Powell Predicting that inflationary pressures will ease, and employment and economic growth will strengthen in the coming months.

He said last night:

We think we can be patient. If asked for an answer, we will not hesitate.

“We don’t think this is a good time to raise interest rates because we want to see the labor market recover further.

That cautious mood propelled Wall Street higher last night, and we expect European markets to hit new highs today.

The OPEC+ group is holding its monthly meeting to determine oil production. They are currently adding 400,000 barrels per day per month, and there is increasing pressure from countries, including the US, to boost production to ease the global energy crisis.

ipek ozkardetskaya, senior analyst swiss quotes, They say:

There is little chance that the Saudis will succumb to that pressure in my opinion, but there is still hope that they will increase the supply by a little over the actual 400’000 bpd, to make a little more money and help us spend. A better winter, certainly without much of a drop in prices.

work schedule

• 7am GMT: German factory orders for September
• 9am GMT: UK car sales figures for October
• 9.30 a.m. GMT: UK construction PMI for October
• Afternoon GMT: Bank of England interest rates decision, monetary policy report released
• 12.30 pm GMT: Bank of England press conference