Bank of England cuts growth forecasts and leaves rates on hold - as it happened
Rolling coverage of Mark Carney's press conference, after the Bank of England cuts its UK growth forecasts and warns that the global economy is weakening
- Summary: Carney rejects criticism of forward guidance
- Full story: BoE leaves rates on hold again
- Carney: rates more likely to rise
- Negative rates weren't discussed
- Here are the new growth forecasts
6.51pm GMT
One last thing...The London stock market outperformed its French and German rivals today, to finish 61 points higher, or 1%, at 5898.
Mining shares led the way, with Anglo American surging by 19%, Glencore gaining 15% and Antofagasta jumping by 14%.
European Closing Prices:#FTSE 5898.76 +1.06%#DAX 9393.36 -0.44%#CAC 4228.53 +0.04%#MIB 17626.04 +1.23%#IBEX 8468.1 +1.85%
6.44pm GMT
A late PS...
Larry Elliott, our economics editor, has summed up the message from the Bank of England today. Here's his conclusion:
There are three conclusions to be drawn from the inflation report, the minutes and the governor's letter.
The first is that it would now be a major surprise if interest rates rose this year.
Related: Bank of England and interest rates: always crashing in the same car
3.26pm GMT
And finally, a couple of photos from today's press conference just landed:
3.08pm GMT
Ouch. The latest economic data from America is a reminder of why the Bank of England is worried about the global economy.
US factory orders shrank by 2.9% in December, according to new data - the biggest drop since the end of 2014.
*DECEMBER FACTORY ORDERS DECLINE BY MOST IN A YEAR
*U.S. DECEMBER FACTORY ORDERS FALL 2.9%; EX-TRANSPORT DOWN 0.8%
3.05pm GMT
Being criticised by journalists is an occupational hazard in central banking, but Mark Carney doesn't appear to enjoy it.
So he may not particularly like this analysis of today's inflation report, from Sky News's Ed Conway.
Mr Carney's problem is that every time he makes a big forecast he seems to get it wrong.
When he came into office, the Governor brought with him a whizzy new framework for setting UK interest rates. Under "forward guidance", he would provide clarity about borrowing costs.
Wide of the Mark. The BoE Governor is addicted to forecasts. Sadly he's not brilliant at them https://t.co/EtYshiydkB
2.57pm GMT
The Independent's Ben Chu flags up one curious moment in today's press conference:
Ben Broadbent at Bank of England today said there was no reason to put up rates simply because slack has been eliminated...
...Broadbent: "There is no mechanical link between level of spare capacity and the appropriate level of interest rates"...
interesting to contrast that with words of former deputy BoE governor Charlie Bean in Feb 2014... pic.twitter.com/JW5qMDnPL8
2.52pm GMT
Today was dubbed "Super Thursday", but it was more like "Party pooper Thursday" as the Bank of England cut its growth forecasts.
Savers, who might wonder when they might get a higher interest rate, won't be feeling particularly super, either.
"With a unanimous vote to keep interest rates unchanged, a mediocre global economic outlook and growing deflation fears, 'Super Thursday' has proved to be anything but.
"Beleaguered savers, who yet again will be inwardly groaning at the news, may also be resigned to the fact that they have limited options at present. However, now more than ever, savers need to make their investments work harder for them. Those looking to secure their financial future, should review deposits and options for investments and look at reducing debt while it is still relatively cheap to do so."
2.38pm GMT
There was quite a contrast between Mark Carney's performance at the press conference, and the minutes of this week's Monetary Policy Committee meeting released at noon.
Kallum Pickering, senior UK economist at Berenberg Bank, says the MPC are clearly worried.
The MPC cautioned on risk from financial market volatility, slowing global growth and now the EU referendum.
The committee noted that since the previous report other central banks including the European Central Bank had eased further, oil prices had fallen and financial market volatility had risen. This was linked to developments in China and other emerging markets and had 'coloured' the outlook for the global economy
Looks like Dovish Carney oversaw the Inflation Report and Hawkish Mark turned up to the presser.
2.31pm GMT
Stephanie Flanders, JP Morgan's chief market strategist for Europe (and former BBC economics editor), says weak wage growth could scupper a rate hike this year.
She writes:
The bottom line of today's report is that the UK cannot ignore the weakening of global growth prospects - particularly the weakness of global trade - and neither can the Bank of England. But domestic consumption is driving the recovery in the UK and the US and the Bank of England can see little reason to expect domestic consumption to grind to a halt.
On balance, we still expect the US Federal Reserve to raise rates again over the course of 2016 as recession worries recede and sentiment in emerging market economics starts to stabilise. In that environment, we would expect the Bank of England also to raise rates by the end of 2016. However, much will depend on domestic wage pressures, which look somewhat weaker now than they did 6 months ago.
2.15pm GMT
Back in 2014, Mark Carney was labelled the "unreliable boyfriend" for giving mixed messages about possible rate rise timings.
Today, it felt like the governor was playing a defensive husband, denying that he ever misled the public while insisting that he'll still raise rates at the right time.
"Absolutely. The whole MPC stands by that."
We are not going to tie our hands ever to raise interest rates or adjust policy in any way, shape or form to a certain date."
The outlook for trade is particularly challenging, with net exports expected to drag on UK growth over the forecast period.
"There is not yet a big risk premium built into business and household confidence around the referendum. We do see in th eexchange rate market, and it's observed in the report, that there has been some buying of protection if you will, around the referendum."
1.38pm GMT
That's the end of the press conference. The press pack are scrambling back to their newsrooms, and Mark Carney has headed back to his office to keep the monetary wheels in motion.
I'll pull together a summary shortly.
1.33pm GMT
Q: Negative interest rates are now in place in Japan, the eurozone, and Switzerland, so are they within the Bank's toolkit?
Carney replies that the bank thinks interest rates are "not at the lower bound" - in other words, they could be cut further.
1.28pm GMT
Another questions about Brexit -- what contingency plans have the BoE taken?
Carney declines to reveal any details, but suggests that - like with the 2014 Scottish referendum - the Bank will reveal its homework after the event.
1.26pm GMT
Q: Are you worried, governor, that you might go through your entire tenure at the Bank without raising interest rates?
Carney insist he's relaxed about this prospect.
The important thing is that we set policy to maximise the changes that we meet our objectives. That's how we're going to be judged.
1.22pm GMT
Carney on global threats: UK in a v different position than 7 Yrs ago, improved corporate and personal balance sheets, more momentum in econ
1.21pm GMT
Q: How worried is the Bank of England about the global economy?
We do see some downside risks, Carney replies. Britain is a particularly open economy, so it's very vulnerable to global problems.
1.20pm GMT
BoE's Broadbent: fears over deflation voiced in this press briefing a year ago haven't come true,"don't think we should overemphasise risks"
1.17pm GMT
Q: When does low inflation start to become a worry for the Bank?
Carney bats this question over to Ben Broadbent.
1.14pm GMT
Now deputy governor Ben Broadbent takes the microphone, insisting that there's no 'mechanical link' between the UK output gap and any interest rate move.
Right, brace for some output gap stuff now: Ben Broadbent says no mechanical link between output gap and level of interest rates
1.11pm GMT
Feels like forward guidance is dead as Carney says: when it comes to making each decision we won't be bound by something said in the past.
1.11pm GMT
We won't be "bound by past comments" when we decide it's time to raise interest rates, says Carney.
Carney: We won't be bound by what we've said previously.
i.e listening to this conference is pretty pointless
1.07pm GMT
City experts aren't very impressed with Mark Carney's performance, as he tries to talk down the Brexit risk and talk up the chances of an interest rate hike:
*CARNEY SAYS NOT YET A BIG RISK PREMIUM RELATED TO EU REFERENDUM
We shall see.
#Carney first question on rate CUT.....
"whole MPC stands by forecast that first rate move will be higher"
that's not what markets think
Dear UK Public. Carney and the BofE are guessing. They haven't got a clue, don't wait for them to tell you your future.
1.04pm GMT
Our economics editor Larry Elliott asks Carney when the decision about rate rises will come into "sharper focus" again.
Carney denies that the MPC are looking at monetary policy through bleary eyes. We take a decision at every meeting. This week's decision was "easy", though.
1.03pm GMT
Carney gets a question about the European Union referendum.
He says the Bank of England isn't modelling for 'parallel universes", so today's report doesn't estimate the impact of Brexit.
Carney on brexit effects: we assume the status quo and not parallel universes when making our forecasts.
1.00pm GMT
On credit growth Carney still relatively sanguine: "not one of the top issues" that the FPC is looking at
12.59pm GMT
Mark Carney is trying to argue that the financial markets are underpricing the chances of a UK interest rate rise.
V hawkish Carney: "there's not quite enough tightening in [the IR] market path" And NB the path in the IR is less dovish market now
Once again, Governor's message in Inflation Report press conference is v different to report itself. Report: dovish. Governor: hawkish
The Bank did send a signal that they think the market is wrong about when it thinks rates will rise. Investors think the first rate rise won't come until February 2018 and the Bank has tried to say they should bet on it coming sooner.
But the way they send this signal is so opaque - a couple of graphs buried in chapter 5 of the Inflation Report - it's not really clear whether anyone will pay attention. Carney's forward guidance certainly hasn't paid dividends for investors up until now."
12.55pm GMT
Carney is now warning that there could be more slack in the labour market than first thought.
That would mean wage growth might be disappointing (as firms wouldn't have to fight for workers as much), meaning inflation remains weak.
Carney: national living wage coming soon is factored into wage and inflation forecasts. 5-6mill people affected directly and indirectly
12.52pm GMT
Q: Do you think the public gives your advice as much credibility as it used to, given previous guidance on rates?
Carney gives a long answer, defending his original forward guidance (he originally set a 7% jobless rate as a key target before considering a rate rise, only to backtrack when it was achieved sooner than planned).
An audible gasp in the room as Mark Carney denies any timing advice in Forward Guidance! #InflationReport #BoE #GBP
12.49pm GMT
Carney in Q&A: view is that more likely than not next move in rates will be up pic.twitter.com/umY1vCmSR5
12.44pm GMT
Onto questions:
Q: Does Mark Carney still believe interest rate are more likely to rise, rather than fall?
12.43pm GMT
Interest rates are more likely than not to rise during the forecast horizon, says Carney.
He points to the current "market path" for interest rates (where investors expect borrowing costs to be). On that path, inflation will hit its 2% target in the medium term, and then rise higher, meaning higher borrowing costs will be needed.
We'll do the right thing at the right time, on rates.
12.39pm GMT
Katie is tweeting the key points from Carney's press conference:
BoE Carney flags global growth has slowed further, US grown less than expected.Downside risks to growth in uk from backdrop
Carney: uk financial system is resilient. matched by resilience of uk private sector. Business and consumer confidence measures "robust"
Carney: mpc expects average hours worked in uk to resume downward trend. Productivity has picked up.
12.38pm GMT
Carney says the Bank of England expects real incomes in the UK to grow solidly this year, after several lean years.
And business investment should also continue to grow strongly.
12.37pm GMT
Carney then warns that global financial conditions have deteriorated notably recently, with a "particularly challenging" outlook for trade.
That means Britain's net exports will continue to drag on growth (ie, we'll import more than we sell to the rest of the world)
#Carney speaking now: "global growth has slowed again", despite boost from lower oil price and fiscal fillip in developed economies.
12.35pm GMT
The governor of the Bank of England is giving a press conference now, to discuss the quarterly inflation report.
Mark Carney begins by saying that the UK economy is in much better shape than in March 2009 when rates were first cut to 0.5%.
12.31pm GMT
The prospect of UK interest rates being cut to a new record low is looming over the City:
Market now pricing a ~30% chance of a BOE rate CUT by the end of the year. Which is frankly nonsense pic.twitter.com/dz3AVPcSxc
12.30pm GMT
It's staggering to think that UK interest rates have now been pegged at 0.5% for almost seven years (it started in the dark days of March 2009)
Laith Khalaf, Senior Analyst at Hargreaves Lansdown, says we could see a decade of ultra-low rates:
'An interest rate rise is like the pot of gold at the end of the rainbow, the nearer you get to it, the further away it moves. A rise in rates now looks firmly in the long grass, with growth forecasts cut and cheaper oil putting downward pressure on inflation, which is already way below the Bank of England's target.
Markets are currently pricing in a rate rise in the middle of 2017, though they have been consistently premature in their forecasts, and reaching the dubious milestone of a decade of ultra-low interest rates is now a distinct possibility.
12.28pm GMT
The prospect of an early UK interest rate rise has receded into the distance, writes Katie Allen from the Bank of England.
She reports:
The Bank flagged the recent sharp sell-off in global stock markets and investors' jitters about a slowdown in China as it revealed that policymaker Ian McCafferty dropped his recent call for a rate rise.
He had voted against the eight other members of the Monetary Policy Committee (MPC) since last August but this month agreed with his colleagues that it was too soon to raise interest rates from 0.5%, where they have been for almost seven years.
Related: Bank of England votes 9-0 to keep interest rates on hold
12.26pm GMT
The pound has fallen almost half a cent against the US dollar, to $1.456.
Markets are concluding that interest rates won't move for some time, given today's gloomy inflation report and the news that Ian McCafferty has given up calling for a rate hike.
Sterling has dipped after the BoE's lone hawk changed his call from hike to hold https://t.co/bFW8Yurwi9 pic.twitter.com/94jbjfGxhi
12.25pm GMT
The Inflation report is online here, and full of interesting charts if you like that kind of thing.
This one shows how the oil price has fallen much further than the Bank expected:
12.13pm GMT
This chart shows how the Bank of England has cut its growth forecasts for the next three years (the old forecasts are in brackets after the new ones)
Since the November Report, global output and trade growth have slowed further and the latest data suggest a softer picture for UK activity in 2015 than previously assumed, with four-quarter growth slowing to 21/4% by Q4 on the MPC's backcast.
12.11pm GMT
The Bank of England also points to the turmoil in the financial markets:
Developments in financial markets seem in part to reflect greater weight being placed on the risks to the global outlook stemming from China and other emerging economies.
12.09pm GMT
The Bank of England has also taken a knife to its growth forecasts, admitting that the UK economy is not expanding as fast as expected.
It now expects GDP to rise by just 2.2% this year, down from 2.5% three months ago.
*BOE CUTS U.K. 2016 GROWTH FORECAST TO 2.2% FROM 2.5%
Global growth has fallen back further over the past three months, as emerging economies have generally continued to slow and as the US economy has grown by less than expected.
There have also been considerable falls in the prices of risky assets and another significant fall in oil prices.
12.03pm GMT
The 9-0 vote means that Ian McCafferty has abandoned his calls for interest rates to rise.
He had been the lone hawk on the MPC, arguing that borrowing costs should go up now before inflation took hold. But with oil so cheap, and growth weakening around the globe, he's had a rethink.
12.00pm GMT
Breaking: The Bank of England has voted to leave UK interest rates at their current record low of 0.5%.
And the decision was unanimous, with the Bank's monetary policy committee voting 9-0 not to alter borrowing costs.
*MCCAFFERTY DROPS VOTE FOR BOE RATE HIKE ON SLOWER INFLATION
11.33am GMT
We have less than 30 minutes to go until Bank of England announces its interest rate decision, at noon in London.
It will also release its latest quarterly inflation report, with new forecasts for growth and inflation.
How the department overseeing the trade descriptions act have not intervened in the use of the term 'Super Thursday' when the Bank of England posts its inflation report and interest rate decision, is somewhat baffling.
Households should prepare themselves for a possible UK interest rate cut this year, with investors betting that there is now a greater chance that the next move in borrowing costs is down not up.
Money markets are now putting a one-in-four probability on the Bank of England reducing its official rates below the 0.5% level they have been sitting at since 2009.
Investors now think there's a greater chance of a UK interest rate cut than a rise this year https://t.co/sK4tRDAg2M
11.10am GMT
Back in Brussels, Pierre Moscovici has explained that his latest forecasts don't factor in the prospect of Britain's leaving the EU.
Why not? Because everyone's committed to avoiding such an outcome.
Moscovici: we are all fighting to avoid #Brexit and that is why it is not in the forecast.
Greek economy performed better than Commission expected, in response to question about why forecasts always wrong.
Precondition is that reforms in Greece continue, pension reform is most difficult - Moscovici.
10.55am GMT
Shares in London have been lurching around like a well-refreshed journalist leaving The Inkwell after last orders (I imagine).
After jumping almost 90 points at the open, the FTSE 100 index slowly subsided until it was only up 20 points, before getting a second wind and romping ahead again.
Wow. Volatility in the Footsie today is incredible. Up a bit, down a bit, back up but looking toppy again...
10.26am GMT
Commissioner Pierre Moscovici is briefing the media now, about the EC's new economic forecasts.
My colleague Jennifer Rankin is tweeting the key points:
Europe's recovery is now firmly installed, says @pierremoscovici , but let's not get euphoric. Growth forecast for 2% 2017
It's a controversial statement but refugees speed up growth, says Moscovici.
Unemployment forecast for 2017 Greece 23%, Spain 19%, Italy 11%, euro ave 10% - it's called the European recovery.
In new forecast, @EU_Commission still insists #France deficit will miss 3% deficit target in 2017. Now predicting 3.2% of GDP.
Better #Greece debt numbers in new @EU_Commission forecast also better than Nov: "only" peaking at 185% of GDP this yr, rather than 199.7%.
10.23am GMT
Despite those headwinds from China and refugees, the European economy is now entering its fourth year of recovery, says the EC.
Today's report states:
Growth continues at a moderate rate, driven mainly by consumption. At the same time, much of the world economy is grappling with major challenges and risks to European growth are therefore increasing.
10.08am GMT
A flurry of news is flying our way from Brussels, as the European Commission releases its new economic forecasts.
The headline event is that the EC has slashed its forecast for inflation this year to just 0.5%, from 1% three months ago.
Europe's moderate growth is facing increasing headwinds, from slower growth in emerging markets such as China, to weak global trade and geopolitical tensions in Europe's neighbourhood."
EU cuts 2016 eurozone growth forecast to 1.7% from 1.8% on China slowdown, warns migrant crisis could hit growth, in chilly winter forecast
Biggest surprise in @EU_Commission econ forecast? #Greece upwards revisions. No contraction in 2015, only -0.7% in 2016 (was -1.4% & -1.3%)
9.56am GMT
Greece is in the grips of a general strike today as demonstrators renew their protests against the country's latest bailout deal.
Transport links are shut down, shops are closed, and thousands of people are marching through the Greek capital right now.
"If they pass these laws more than 50 percent of our earnings will be taxed and I am one of the lucky ones because I can depend on tourists. Other businesses are really struggling. It's become unsustainable to keep them open. Everyone is very pessimistic."
"Farmers are leading the way. People are very determined to stop this pillaging because pillaging is what it is. Greece and Greeks cannot go on being pushed like this in the name of debt."
9.50am GMT
Apparently the solution to monetary policy paralysis is taller central bank governors:
This is great. pic.twitter.com/LAnTpCbQas
9.32am GMT
You might have expected the euro to fall this morning, after Mario Draghi guilefully declared that central banks shouldn't stop taking action to fight deflation.
But the single currency didn't take the hint. Instead, the euro has hit a three-month high against the US dollar, at $1.116.
9.14am GMT
Sales of Volkswagen cars slumped by almost 14% in the UK last month, suggesting that the company is still suffering from the emissions scandal.
8.57am GMT
Goldman Sachs has weighed into the Brexit debate, predicting that the pound would slump by around 15% if Britain vote to leave the EU.
In a new research note, it argues that investors would be put off from putting capital into the UK if the public reject David Cameron's new deal.
In our framework, a decline of 2% in domestic demand would still see close to a 15% drop in the British pound to close the current account deficit.
Related: Goldman Sachs backs campaign to keep Britain in European Union
8.39am GMT
European Central Bank chief Mario Draghi has dropped a clear hint that the ECB embark on fresh stimulus measures next month.
There are forces in the global economy today that are conspiring to hold inflation down. Those forces might cause inflation to return more slowly to our objective. But there is no reason why they should lead to a permanently lower inflation rate.
What matters is that central banks act within their mandates to fulfill their mandates. In the euro area, that might create different challenges than it does in other jurisdictions. But those challenges can be mitigated. They do not justify inaction.
A very, very powerful speech by ECB's President Draghi, against any form of complacency. March it is. https://t.co/Oo5wwgAfP8
8.38am GMT
Double ouch:
Ouch - @CreditSuisse shares at 1992 low. MS analyst Van Steenis surprised bank didn't pre-announce,if enough capital pic.twitter.com/5dVxt5qQbk
8.34am GMT
Ouch. Shares in Credit Suisse have tumbled by around 10% in early trading.
The Swiss bank is missing out on today's rally, after hitting shareholders with a loss of 5.83 billion Swiss francs ($5.8 billion) in the last quarter. That drove the bank into its first annual loss since 2008.
Market conditions in January 2016 have remained challenging and we expect markets to remain volatile throughout the remainder of the first quarter of 2016 as macroeconomic issues persist .
Credit Suisse shares tumble almost 10% after swing to $5.8 billion loss https://t.co/KYcY9rW9UU
8.18am GMT
Oil is continuing to gain ground this morning, adding to last night's 8% surge.
Brent crude has risen to $35.36, up another 1%.
8.16am GMT
European stock markets are a sea of green, as traders welcome the higher oil price and the weaker US dollar.
- Europe opens higher
- First Asia rise in 3 days
- Oil back above $32
- Pound falls
Latest https://t.co/64SID8b5K2 pic.twitter.com/MwxlJ2SZln
8.10am GMT
Up we go!
European markets are rallying at the start of trading, breaking three days of declines during this volatile week.
Related: Shell profits plunge 87%
8.02am GMT
The key to today's market moves is that the US dollar took an almighty tumble overnight.
After strengthening for months, the greenback suffered its biggest one-day drop since 2011.
This delivered a welcome overshadowing of global growth concerns for markets hooked on cheap money.
Ouch" In case you missed it, US dollar experienced 3rd-biggest 1day drop of past five yrs. https://t.co/Gl7CYl4e0z pic.twitter.com/ttO7tsx9Sx
7.51am GMT
It's been another day of wild market action in Asia.
Most stock markets have surged overnight, on relief that the oil price has climbed back to over $35 per barrel.
What we have seen is one of the most amazing one day moves in oil one will ever see, with US and Brent oil rallying 9% and 8% from yesterday's ASX 200 close.
7.34am GMT
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