Bank of England split over interest rates amid audio hack row - as it happened
Rolling coverage of the latest economic and financial news
- Latest: Bank of England's interest rate decision
- Riksbank hikes interest rates to... zero
- BoE press conference audio feed hacked
- Some City traders got crucial head start on Carney comments
- Try the Guardian Business Christmas Quiz!
5.12pm GMT
Finally, the FTSE 100 has ended the day 33 points higher at 7573, up almost 0.4%.
Multinational companies were lifted by the weaker pound, which has lost half a cent to $1.3030 tonight. Mining giant Glencore (+2.3%), pharmaceuticals firm AstraZeneca (+2%) and medical equipment maker Smith & Nephew were among the risers.
Live Market Update from the CMC dealing desk - European Closing Prices:#FTSE 7573.82 0.44%#DAX 13211.96 -0.08%#CAC 5972.28 0.21%#MIB 23708.94 0.34%#IBEX 9617.2 -0.05%
Prices are indicative only. $FTSE $DAX $CAC $IBEX
5.11pm GMT
On a positive note, at least the problems with the Bank of England's audio feed didn't lead to any interest rate moves being leaked.
Not that there have been many to leak, as Professor Costas Milas of Liverpool University writes:
The hack of the Bank of England's press conference audio feed is very serious and the Bank needs to tighten its IT-related security.
Nevertheless, it is arguably a huge exaggeration to believe that (some) traders might have exploited early information with reference to interest rate moves in particular. Indeed, since 2009 (when the interest rate went down to 0.5%) the Bank has cut the interest rate only once to 0.25% (following the Brexit vote in August 2016) and then hiked to 0.5% (in November 2017) and then again to 0.75% in (August 2018). Notice that these three interest rate actions occurred at the same time while new Inflation Reports were released by the Bank.
3.29pm GMT
Any City traders who took advantage of the hacked Bank of England's audio feed might expect a call from the UK's financial regulator.
Tony Katz, head of Financial Services and Investigations at DPA Piper, explains:
The Bank of England will need to consider whether its information controls were adequate and whether they met the standards they expect of those they regulate.
The FCA will, in all likelihood, be investigating those who have sought to take advantage of potential inside information and will take appropriate action should any evidence be found."
2.51pm GMT
Pressure is mounting on the Bank of England's chief operating officer to resign immediately.
Joanna Place is facing scrutiny over the security breach that gave paying hedge funds early access to Mark Carney's market-moving press conferences.
Joanna Place reports directly to Carney, the governor, and has had responsibility for the Bank's information security since July 2017.
Danny Blanchflower, who served on the MPC until 2009, said Place's position was untenable after the Bank admitted the breach, first reported by the Times, late on Wednesday night.
Related: Bank of England executive urged to quit over security breach
1.56pm GMT
Economist Shaun Richards has given the Bank of England quite a blast for allowing its audio feed to be hacked, giving some hedge funds an advantage.
This is disgraceful on two counts. Firstly in an era of computer driven algorithm driven trading an edge like this is quite something for them as we mull exactly who was more equal than others? To coin a phrase.
Next is the fact that this happened at the ECB several years ago and after such a warning someone should have been dispatched to make sure that it could not happen at the Old Lady. So we can add laziness to the incompetence.
Yet another scandal unfolds at the Bank of England https://t.co/IzpRHHaF8r via @notayesmansecon
1.15pm GMT
Hinesh Patel, portfolio manager at Quilter Investors, says the BoE is in 'wait-and-see' mode, after leaving interest rate on hold.
This familiar holding pattern is likely to continue for some time as we await detail on what the future relationship with the European Union looks like. However, it is clear from the Bank that it is not just Brexit, or the hedge funds, that Mark Carney and co seem to be concerned about.
They have specifically referenced the need to act on interest rates should global growth fail to stabilise and ease to help boost UK GDP and inflation.
"While today's interest rate decision was widely anticipated, a myriad of factors will be crucial in determining the future path of UK monetary policy. When the new BoE governor takes over in January 2020, he or she will need to consider the risk of falling demand from the UK's most significant trading partners, the impact of the US-China trade war on the wider global economy and, barring any surprises, the outcome of the long-drawn Brexit process." -
"After last week's election result, the short-term clarity we have on Brexit could give a lift to economic sentiment, especially for businesses. A modest fiscal easing in the forthcoming budget could also push things along a little.
"Overall, though, as attention turns to the December 2020 end of transition deadline, the mood will likely remain subdued and growth weak. We expect that the committee will move further towards a rate cut in 2020 and a quarter point easing in May."
12.40pm GMT
Related: Bank of England keeps interest rates on hold despite weak economy
12.25pm GMT
The Bank minutes show that Jonathan Haskel and Michael Saunders believe the UK economy needed an interest rate cut now, to protect it from problems at home and abroad.
The pair, both external members of the committee, argued:
The economy had been a little softer than expected, and there was a modest but rising amount of spare capacity. Core inflation was subdued.
Employment growth was slowing and seemed likely to weaken further given trends in vacancies and firms' hiring intentions. Downside risks remained to the MPC's projections from a weaker world outlook and Brexit uncertainties.
12.16pm GMT
Most members of the Monetary Policy committee remain hopeful that the UK economy will strengthen in 2020.
They anticipate lower uncertainty, easier fiscal policy and somewhat stronger global growth. Boris Johnson's victory, and the trade truce between the US and China, could help.
The biggest news since November had been on global trade and domestic policy developments, but it was too early to judge how material that would prove to be for the economic outlook.
12.12pm GMT
There's little chance of significant economic growth this quarter, the BoE fears:
UK GDP increased by 0.3% in 2019 Q3 and is expected to rise only marginally in Q4.
Household consumption has continued to grow steadily, but business investment and export orders have remained weak. Financial markets have remained sensitive to domestic policy developments.
Since the November Report, the sterling exchange rate has appreciated by 2% and UK-focused equities have outperformed their international counterparts. There is no evidence yet about the extent to which policy uncertainties among companies and households have declined.
12.09pm GMT
The Bank reckons the global economic outlook appears slightly rosier than a month ago.
It says:
Global growth has shown tentative signs of stabilising and global financial conditions remain supportive.
The partial de-escalation of the US-China trade war provides some additional support to the outlook relative to the November Report, although trade tensions remain elevated.
12.08pm GMT
The Bank's monetary policy committee also voted unanimously to maintain its asset purchase scheme (which currently holds 435bn of government debt and 10bn of corporate bonds)
12.01pm GMT
Newsflash: The Bank of England has left UK interest rates on hold, at 0.75%.
But two policymakers, Jonathan Haskel and Michael Saunders, pushed for rates to be cut to 0.5%, echoing last month's vote.
11.26am GMT
The Bank of England's early-access breach has broader implications for the new governor's role, according to former rate-setter Andrew Sentance.
Successive governors have taken on greater and greater responsibilities. These range from dealing with intense scrutiny over every word in market-sensitive interest rate announcements to running a large organisation with significant security duties.
"One of the weaknesses of the Bank's organisation is too much power is concentrated in the governor.
"If I was making a recommendation it would be to act more as a chairman and less as a chief executive."
"The productivity of deputy governors has not been a good lead to the economy."
11.00am GMT
Here's our news story on this morning's retail sales shocker:
Related: Retail sales at 19-month low as Christmas shoppers leave it late
10.26am GMT
The Wall Street Journal has a good take on Sweden's interest rate hike. Here's a flavour:
Sweden's central bank, one of the pioneers in wielding negative interest rates, became the first to end that policy Thursday, a move closely watched by other institutions that have resorted to what was supposed to be a radical and short-lived measure.
In 2009, the Riksbank, the world's oldest central bank, became the first to charge commercial banks to hold deposits rather than pay them interest. In 2015, it lowered its key policy rate below zero, following a similar move by the European Central Bank the year before.
9.56am GMT
Just in: UK retail spending has slowed sharply, suggesting that nervous consumers cut back ahead of the general election.
Retail sales fell by 0.6% month-on-month in November, the Office for National Statistics reports. That's much worse than expected.
UK retail sales volumes down -0.4%q/q in the 3 months to November. Corresponds to a retail sector drag on GDP growth of c. -0.02%q/q. Non-store retailing, which is primarily internet retailers, saw a fall of -2.5%q/q. Growth for food (0.5%q/q) & household goods stores (0.6%q/q). pic.twitter.com/5ZIhvrpcke
9.48am GMT
Andrew Sentance, a former Bank of England policymaker, says the hack of its press conference audio feed is "unprecedented" for a central bank.
Sentance, who is now senior adviser to Cambridge Econometrics, told us the Bank faces a lot of serious questions:
"Central banks pride themselves on confidentiality and making sure communication is well managed.
There has been an abuse of information here. The question in your mind will be, if this happened what else has happened? Are the Bank's communications secure?"
8.59am GMT
Sweden's interest rate rise is a small but significant milestone as central bankers try to extricate themselves from a decade of loose monetary policy.
Significantly, the Riksbank is ending negative interest rates while still continuing its asset-purchase programme (buying bonds with new money to stimulate growth).
Riksbank hike rates to 0% to end period of sub-zero rates while maintaining government bond purchases - different to the ECB that sees the APP as the marginal policy tool when tightening. RB seem negative consequences of sub-zero rates too detrimental to maintain the current [1]
stance, and with the latest inflation reports suggesting CPIF is returning to the 2% target they have decided to strike now. Notable dissent on the decision from Deputies Breman and Jansson - former suggested the hike to come in H1 2020. [2]
Forward guidance of the repo rate suggests 0% is here to stay over the coming years, however. Risks remain in the current global climate for another cut but the nature of this hike suggests the threshold to re-enter negative territory is much higher than previous. [3]
8.39am GMT
Newsflash: Sweden's central bank has raised interest rates, to the heady heights of ZERO!
#Sweden ends Sub-ZERO experiment: Riksbank raises repo rate to 0.0% from -0.25%. pic.twitter.com/at9x4UsVMO
I see the Riksbank have gone back to 0% interest rates as expected. Sensible.
Pacing through their presentation I see the below chart covers most of the potential future outcomes out there!!
(via https://t.co/TWBIrVXW4h ) pic.twitter.com/RSpHH77kEd
8.34am GMT
You don't need to hack the Bank of England to know that financial markets are winding down for Christmas.
The " Tory Glory " election relief rally has given way to the uncertainty of the next stages of the Brexit process. UK-EU trade negotiations, and the tight proposed deadline at the end of the transition period.
8.28am GMT
Here's our news story on the Bank of England's eavesdropping woes:
Related: Hedge funds hacked into Bank of England briefings
8.27am GMT
The Times also reports that these hedge fund clients were paying between 2,500 and 5,000 per press conference for access to the BoE's audio feed.
You don't pay that sort of money unless you're expecting a trading advantage in return.
8.09am GMT
The BoE insists that none of its decisions have been leaked early -- just the audio feed of its press conferences (which is bad enough!).
It says:
The Bank operates the highest standards of information security around the release of the market sensitive decisions of its policy committees.
The issue identified related only to the broadcast of press conferences that follow such statements."
8.04am GMT
The Bank of England has now referred the misuse of its press conference audio feed to the Financial Conduct Authority, Reuters reports.
The FCA is responsible for regulating the City, so will have to decide whether this is a breach of its regulations.....
7.51am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
This wholly unacceptable use of the audio feed was without the bank's knowledge or consent, and is being investigated further."
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