Bank of England warns Brexit delay would hurt growth, after leaving rates on hold - as it happened
UK central bank votes to keep interest rates at 0.75%, and warns that Brexit is making economic data volatile
Earlier:
- OECD cuts 2019 and 2020 growth forecasts
- Last night, Federal Reserve cut rates by 25 basis points...
- ..and was called gutless by Donald Trump
4.45pm BST
Finally, Britain's FTSE 100 index has closed 42 points higher at 7,356, up 0.6%.
International Airlines Group (+3.5%), Vodafone (3.2%) and AstraZeneca (+2.8%) led the risers.
3.30pm BST
If you're just tuning in, here's our news story on the Bank of England's interest rate decision.
Brexit uncertainty and the slowdown in global growth has weakened the economy and made an interest rate cut more likely, the Bank of England has said.
The central bank said interest rates would remain at 0.75% after a unanimous vote of the monetary policy committee (MPC) on Thursday, but it signalled that further Brexit uncertainty amid a US-China tariff war could warrant a rate cut in the near future.
Related: Interest rate cut more likely due to Brexit uncertainty, says Bank
3.11pm BST
Saga, the insurance and travel company aimed at the over-50s, has apologised after customers were sent a brochure advertising a cruise "exclusively for Brits", prompting a furious backlash.
Twitter user Anthony Bale, who is a university professor, said his mother was "outraged" after being sent the magazine, the front page of which outlined the characteristics of the cruise.
Outraged phonecall from my mother: she was shocked to receive @SagaUK brochure advertising cruises "exclusively for Brits." She asked me why they would say this & if it's legal. "aTMi
(Also, in terms of grammar pedantry, "Exclusively Adult Only" + "For Over 50's" is distressing) pic.twitter.com/3giXg5iybD
Related: Outcry as Saga travel firm advertises cruise 'exclusively for Brits'
3.02pm BST
Roger Jones, London & Capital's Head of Equities, has crunched through the Bank of England's interest rate decision, and detected a new dovish flavour:
He says:
"No surprises from the Bank of England today but the tone is more dovish with the statement making reference to falling inflation. This represents an about-turn from comments made earlier this year when the Bank of England tried to present a more hawkish tone.
The creditability of the Bank of England has definitely fallen over the last 4 years due to ultimately poorly timed decisions and constant reversals in guidance commentary. The next meeting will be after the 31st October Brexit potential deadline so all options have been kept open. However, under any outcome it is difficult to see rates going up over the next year and hence the market is pricing in one 25bp cut."
2.52pm BST
The Federal Reserve's latest intervention into the money markets has proved a little too popular.
The Fed's offer of $75bn of liquidity today was oversubscribed, with banks making $84bn of bids for short-term funding.
2.48pm BST
Wall Street has opened higher, with the Dow Jones industrial average up 90 points or 0.3% at 27,237.
1.42pm BST
Just in: The US jobs market continues to look healthy, according to the latest weekly jobless report.
Just 208,000 Americans filed new claims for unemployment benefit last week, up 2,000, but still a low level in historical terms.
U.S INITIAL JOBLESS CLAIMS ACTUAL: 208K VS 204K PREVIOUS; EST 213K
U.S CONTINUING JOBLESS CLAIMS ACTUAL: 1661K VS 1670K PREVIOUS; EST 1672
1.30pm BST
Over in America, the Federal Reserve is holding another liquidity operation to ensure US banks can cover their overnight liquidity needs.
This is because the 'repo rate' (the cost of short-term lending between banks) has spiked this week. Policymakers insist this isn't a sinister development, but obviously want to ensure there's no shortage of dollars out there...
Today's NY Fed repo has begun with US $75 billion on offer. Yesterday it was $5.05 billion short, so let's see how it goes....
12.59pm BST
Brexit isn't the only problem dragging back UK growth, says PwC chief economist John Hawksworth:
There have also been continuing signs of weakness in the global and Eurozone economies, linked to ongoing US-Chinese trade tensions and heightened geopolitical risk in the Middle East and elsewhere.
These international risk factors underlie recent rate cuts by the Fed and the ECB and could have caused the MPC to stay its hand even in the absence of Brexit."
12.43pm BST
The Bank of England has now left interest rates on hold for 13 months running, since raising them from 0.5% to 0.75% in August 2018
Sajiv Vaid, portfolio manager at Fidelity International, argues that they will be forced to cut borrowing costs soon.
The job of the MPC has unquestionably been made difficult by navigating monetary policy against the uncertainty caused by the Brexit shenanigans over the last year or so, and one can make the case that until there is clarity on the matter the MPC are best served by holding fire. I would argue that given the anaemic growth in the UK is already trending below the Banks own projections and with little clarity on the timing of a Brexit resolution (soft or hard) or even a general election, the case for an 'insurance cut' has become even more pertinent
The tone of the MPC remains too ambiguous with regards to the path of interest rates and I expect the data to continue to disappoint. When looking at the 'known knowns' I think the case for a rate cut is compelling and I expect the MPC to come to the same conclusion by year end."
12.17pm BST
Newsflash: The Bank of England has warned that the economy would suffer from another Brexit delay.
It points out that uncertainty over Britain's future has already hurt the economy....and further confusion would not help.
For most of the period following the EU referendum, the degree of slack in the UK economy has been falling and global growth has been relatively strong. Recently, however, entrenched Brexit uncertainties and slower global growth have led to the re-emergence of a margin of excess supply.....
It is possible that political events could lead to a further period of entrenched uncertainty about the nature of, and the transition to, the United Kingdom's eventual future trading relationship with the European Union.
NEW - Dovish Bank of England keeps rates and asset purchases on hold, but also indicates rates lower for longer in "further period of entrenched uncertainty".
Bank included new language about "political events" leading to continued uncertainty, against weak global background, meaning slower growth and inflation.
Also specifically refers to the passing of the Benn Bill in minutes lowering perceived chance of No Deal/ affecting markets
- Bank continues to describe No Deal as leading to another sterling fall, rise in inflation, and slower economy - but that the Benn Bill has lowered market perceptions of it - rates up or down depending.
A "smooth Brexit" ie deal would lead to "gradual and limited" rate rises.
12.08pm BST
The Bank of England has also warned that 'underlying growth' in the UK has weakened, and cited weak business investment due to Brexit uncertainty.
However, it also forecasts that GDP will rise in the current quarter, having shrunk in April-June. If so, that would keep Britain out of a recession.
Brexit-related developments are making UK economic data more volatile, with GDP falling by 0.2% in 2019 Q2 and now expected to rise by 0.2% in Q3. The Committee judges that underlying growth has slowed, but remains slightly positive, and that a degree of excess supply appears to have opened up within companies.
Brexit uncertainties have continued to weigh on business investment, although consumption growth has remained resilient, supported by continued growth in real household income. The weaker global backdrop is weighing on exports.
12.03pm BST
The Bank of England has issued a statement accompanying its decision.
It warns that trade tensions are worsening (a point also made by the Fed last night, and the OECD this morning):
Since the MPC's previous meeting, the trade war between the United States and China has intensified, and the outlook for global growth has weakened. Monetary policy has been loosened in many major economies. Shifting expectations about the potential timing and nature of Brexit have continued to generate heightened volatility in UK asset prices, in particular the sterling exchange rate has risen by over 3%.
12.00pm BST
Newsflash: The Bank of England has left UK interest rates on hold, at 0.75%.
It's a unanimous vote, with all nine policymakers favouring no change today.
11.56am BST
Newsflash: US president Donald Trump has played down the suggestion he could sack Federal Reserve president Jerome Powell for not aggressively slashing interest rates.
In an interview with Fox News, Trump also said he was "not thrilled" with the Fed, which trimmed borrowing costs yesterday.
U.S. Federal Reserve Chairman Jerome Powell's job is safe, U.S. President Donald Trump said in a Fox News interview that aired on Thursday, adding that he was "not thrilled" with the U.S. central bank.
"It's safe," Trump, asked about the chairman's job, told Fox News in the interview, taped during the president's trip to California on Wednesday after the Fed's decision to lower interest rates.
Trump on Fox:
- #Fed should cut rates more as others cut
- Powell does not know how to play the game very well
- Powell's job is safe$USD
11.43am BST
Back in the markets, the oil price has suddenly spiked.
Brent crude is up 2.7% this morning to $65.31, from $63.60 last night. The spike followed a report that Saudi Arabia has asked Iraq for 20 million barrels of oil, to supply its refineries.
#OOTT crude up on Saudi request for 20m barrels fro Iraq pic.twitter.com/DC3l2TpGiG
Saudi Arabia reportedly asks Iraq for 20M barrels of crude - press - Aramco said to seek diesel, gasoline, fuel oil for domestic use . So much for ample supplies. #OOTT pic.twitter.com/8MsXpQUMOg
11.16am BST
John McDonnell MP, Labour's Shadow Chancellor, says Westminster politicians should heed the OECD's warning about a no-deal Brexit.
"This report is a clear and stark warning of what we face if Johnson takes this country over the cliff edge of no deal Brexit. It confirms the absolute necessity of preventing this needless threat to our economy."
11.10am BST
The OECD has long warned that Brexit would be bad for the UK economy, and today it has claimed that a disorderly No Deal could trigger a long slump.
My colleague Philip Inman explains:
Today's report estimates that losing unfettered access to EU markets after 31 October will likely plunge the UK into a recession next year. The loss of trade, investment and technical knowledge plus a further fall in the pound will prolong Britain's low rate of growth until at least 2022.
Laurence Boone, the OECD's chief economist, said an agreement to smooth Britain's exit was important to protect businesses and the economy.
Related: No-deal Brexit will cut 3% off UK economic growth, warns OECD
10.53am BST
Here are some charts from the OECD's new economic outlook report, showing how economic uncertainty and trade tensions are hurting growth and investment:
10.42am BST
The OECD has also downgraded its growth forecast for several advanced economies, including the UK.
Here's the details
10.13am BST
The OECD's chief economist, Laurence Boone, says escalating trade tensions are causing serious harm to the world economy.
She told Reuters:
"What looked like temporary trade tensions are turning into a long-lasting new state of trade relationships."
"The global order that regulated trade is gone and we are in a new era of less certain, more bilateral and sometimes assertive trade relations,"
10.06am BST
Newsflash: The Organisation for Economic Co-operation and Development has warned that global growth has slowed to its weakest since the financial crisis.
The OECD has slashed its global growth forecast for 2019, from 3.2% to 2.9%.
#BREAKING OECD slashes global growth forecasts for 2019 and 2020 pic.twitter.com/XAwnEUuPht
10.02am BST
Tom Leman, head of retail & consumer at Pinsent Masons, argues that too many retailers are still playing 'catch-up' - - and Brexit worries aren't helping.
Here's his take on August's retail sales figures.
"Whilst monthly stats are a useful indicator of the market they do not tell the full story. The challenging global political environment makes it difficult to make too many assumptions, from these figures, about the health of the retail sector. The threat of a no-deal Brexit makes it almost impossible to predict retail sales and consumer spending in September and October.
Traditional retailers who have evolved their business to reap the rewards of changing consumer behaviours are ahead of the game. These retailers articulate clearly what they stand for and deliver the right products in the right way to customers. But, there are many, generally stuck in the middle, still playing catch-up who need to focus on business evolution to remain competitive."
9.59am BST
Economist Rupert Seggins has crunched today's retail sales figures...and also pointed out that the monthly data should be treated cautiously.
UK retail sales growth of 0.6%q/q in the 3 months to August, consistent with a c. 0.03% retail sector contribution to GDP growth. Rise driven mainly by non-store sales & sales by specialised shops (e.g. chemists, computer shops, games shops etc.). pic.twitter.com/dkCwDg4B1z
The UK's favourite piece of statistical noise - monthly change in retail sales. pic.twitter.com/O29YPM1cVg
9.51am BST
Just in: UK retail sales fell in August, suggesting that consumers are becoming more cautious.
The Office for National Statistics reports that retail spending dropped by 0.2% last month. That's weaker than expected, with economists forecasting sales would be flat.
Internet sales fell on the month by 0.8% when compared with July 2019.
Other stores reported the largest fall of 5.8% but non-store retailing was the largest contributor to the monthly fall because of its large weight of 50.7%.
UK retail sales for July revised up so a 0.2% decline in August not that bad. #gbp
This is a slowdown compared to the stronger growth experienced earlier in the year which peaked at 6.7% in March 2019.
Commenting on today's Retail Sales figures for the 3-months to August, Head of Retail Sales @StatsRhian said https://t.co/OGL94RYxEO pic.twitter.com/vXvDNT91b7
9.40am BST
High street retailer Next has been burned by the unusually hot autumn weather.
It is very hard to determine whether the uncertainty over Brexit is having any effect on consumer spending and we can find no evidence that it is affecting spending on small ticket price items.
Certainly, the first few weeks of the Autumn season have been disappointing. However, we believe that the warm start to September has done much more to hinder sales than the political temperature."
"I remember my dad quipping that a business only discovers its fixed costs when sales decline!"
9.15am BST
Newsflash: Norway's central bank has defied the prevailing mood, by raising interest rates.
The Norges Bank's Executive Board has decided to raise the policy rate by 0.25 percentage point to 1.50%.
Underlying inflation is close to the inflation target. Growth in the Norwegian economy remains solid, and capacity utilisation is somewhat above a normal level. This suggests in isolation a higher policy rate. A higher policy rate may also mitigate the risk of a renewed acceleration in debt growth and house price inflation
BREAKING! #Norway continues to be a central bank 'outlier' as Norges Bank raises rates again. pic.twitter.com/1mYGxRBuIa
9.10am BST
Switzerland's central bank has left interest rates on hold, at their record low of -0.75%.
9.06am BST
European stock markets have opened higher, as trader digest last night's cut in US interest rates....and Fed chair Jerome Powell's comments afterwards.
The main indices are all higher, led by Italy and France.
The Federal Reserve cut the key rate by a quarter of a percentage point to 1.75%-2.00%. In the press conference, Powell noted the "favourable" economic forecast, explaining that this easing step was to "provide insurance against ongoing risks". Strictly speaking, these comments turned out to be a little hawkish than the market expected, pointing to a possible pause in policy easing.
Overall, Powell was very optimistic about the state of the economy, noting healthy growth rates of employment and consumer activity, despite the lower capital expenditures of companies.
8.53am BST
The Financial Times has spotted that City investors are positioning themselves to profit from a no-deal Brexit (or at least limit their losses!).
The FT's Philip Stafford explains:
Investors have taken out a record number of options contracts to bet on or hedge against moves in UK interest rates, amid rising concerns that Britain may depart the EU at the end of October without an agreement on its future relationship with the bloc. Open interest - a measure of traders' live positions in futures and options on UK rates over the next three months - surged to 18.4m contracts on Tuesday at ICE Futures Europe, the main derivatives exchange in London.
The options, if exercised, would allow investors to profit from unexpected rate cuts or protect themselves from the damage stemming from rapid rate rises.
Investors take out record number of options to trade 'no-deal' Brexit https://t.co/xiSPvRWnlm
8.50am BST
Britain's competition watchdog has waded into a takeover between two UK shoe retailers.
My colleague Julia Kollewe explains:
The Competition and Markets Authority fears that JD Sports' 90m deal to buy its smaller rival Footasylum could be bad for shoppers, and will carry out an in-depth investigation unless JD can address its concerns.
The CMA said its initial investigation found the deal could result in a "substantial lessening of competition" by removing one of JD Sports' closest competitors.
Competition watchdog CMA says JD Sports' takeover of smaller rival Footasylum could be bad for shoppers; threatens in-depth investigation if JD doesn't address its concerns
8.42am BST
Marc Ostwald of ADM Investor Services is confident that the Bank of England won't do anything too dramatic today:
The Bank of England can safely be assumed to stand pat, being hostage as it is to very elevated Brexit uncertainty, though it will be interesting to see if the minutes suggest any tweaks to its forecasts, even though these tend to be generally reactive....
The lower than expected CPI, in no small part due to Clothing, imparts a modest upside risk for today's Retail Sales, which have defied gloomy signals from most retail sector surveys in recent months.
8.39am BST
Several other central banks are also setting monetary policy today, including the national banks of Switzerland, Norway, Indonesia, Taiwan and South Africa.
7.40am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Related: Federal Reserve cuts interest rates, and earns another blast from Trump - as it happened
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.
Jay Powell and the Federal Reserve Fail Again. No "guts," no sense, no vision! A terrible communicator!
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