Super Thursday: Bank of England votes to leave rates on hold - live
Britain's central bank has left borrowing costs on hold again, and hinted that rates won't rise for many months
- Bank votes 8-1
- Inflation and growth forecasts cut
- Carney: No regrets
- IoD: Bank is too cautious
5.48pm GMT
European shares had a mixed day, but German and French markets bucked a cautious trend after positive updates from Adidas and Societe Generale, writes Nick Fletcher.
After an initial rise following the Bank of England's dovish comments, the UK market fell back as investors fretted about weakness in the country's economy. The Bank hinted that UK interest rates were not likely to rise as quickly as economists had expected, but it also trimmed its growth and inflation forecasts. Weakness in commodity prices also weighed on UK shares, while there was a certain amount of caution ahead of Friday's US non-farm payroll numbers. Jasper Lawler, market analyst at CMC Markets, said:
Weakness in commodity stocks held down the UK benchmark index despite earnings-led gains in the property and healthcare sectors. The Bank of England signposting a longer period of monetary accommodation was taken as a sign of weakness for the UK economy.
5.45pm GMT
The Bank of England announcement was not dovish, said Alan Clarke at Scotiabank. It just wasn't as hawkish as people had expected. He said:
If you had a blank sheet of paper and came up with:
- a 2-year ahead inflation projection above target and the highest for years;
4.12pm GMT
Mark Carney also shows some sympathy with the Federal Reserve, as the markets wonder if they'll raise US borrowing costs in December.
I'm confident they'll make the right decision, he says.
Carney: Fed has been as transparent as they can be about a decision they have not yet taken. It's a familiar feeling for all central bankers
4.08pm GMT
BOE governor Mark Carney is telling Bloomberg that the UK has 'made progress', but it's been mixed. Consumer demand remains solid.
Mark Carney exclusive: Reasonably prudent to think Bank of England rate will rise in 2016 https://t.co/p0fWBcagK6 pic.twitter.com/wIMU9gY7mF
Carney @bankofengland obviously doesnt like his post conference press today Now it doesn't matter he will say rates will rise next year
4.02pm GMT
If you've not heard enough from Mark Carney already, tune into Bloomberg TV where he's being interviewed now.
3.56pm GMT
There's lots of reaction to today's decision, and the BoE's press conference.
Our economics editor, Larry Elliott, says the Bank's doves are still in charge:
The latest signs from Threadneedle Street are that borrowing costs will rise at some point in 2016, but there was nothing in its dovish quarterly inflation report or from the minutes of the latest meeting of its monetary policy committee to suggest that a move was imminent.
All that might change if the US Federal Reserve decides to push up US interest rates next month. In that event, financial markets would start to look for the Bank to move in the first half of next year.
Related: Interest rate decision shows Bank of England doves still rule the roost
MPC members are supposed to vote according to their own individual view rather than search for what Sir Mervyn King, former BoE governor, called a "false consensus".
Yet, if that is what they are doing, it is nothing short of miraculous that nine economists could essentially agree on the appropriate stance of monetary policy meeting after meeting, year after year.
Comment: The Bank of England's great Monetary Policy Committee mystery https://t.co/KeE8Svy5Dm pic.twitter.com/NoBAjAvTZE
To paraphrase master Yoda, bonkers it would be to raise interest rates in December, or January, or February - or not for some considerable time.
The reason I mention Yoda is that central bank governors, like Jedi masters, are supposed to be infallible.
Will Carney be thrown out of the Jedi council for his forward guidance flopperoo? https://t.co/ULn92aXo58
3.16pm GMT
Analysts at RBC Capital Markets believe the slowdown in emerging markets has come as a nasty shock to the Bank of England.
The MPC voted 8-1 to keep Bank Rate on hold at 0.5% in its November meeting. The November Inflation Report (IR) containing the Bank's latest analysis of the economic outlook struck a decidedly dovish tone though. Two main themes contributing to a more cautious tone are a i) downgrade to the global growth outlook and ii) a more persistent drag on inflation from the prior appreciation of the exchange rate.
Previously the Committee had sounded moderately sanguine about a slowdown in emerging market economies but now it acknowledges performance has "slowed markedly" leading to a downgraded assessment. On the exchange rate theme we were told that the MPC thinks "the dampening influencing of sterling's past appreciation on inflation is expected to be persistent diminishing only slowly over the MPC's forecast period".
3.03pm GMT
Some economists still think the Bank will raise interest rates before the middle of next year:
#UBS retains May call for first #BoE rate hike.
Have to maintain our call for a Q2 rate hike from the Bank of England following today's news.
2.49pm GMT
Martin Beck, senior economic advisor to the EY ITEM Club, agrees that the Bank was more downbeat than expected:
"While we expected a downgrade to the MPC's growth and inflation forecasts in November's Inflation Report, the MPC's latest assessment of the economy struck an unexpectedly dovish tone for interest rates.
"Based on market expectations that the first interest rate rise won't happen until Q1 2017, the MPC forecast that inflation would only slightly exceed the 2% target by that date. This implies the Committee's view of the appropriate timing of a rate rise is roughly in line with the market consensus.
2.42pm GMT
The Institute of Directors has hit out at the Bank of England for playing a "dangerous game" by leaving interest rates so low.
Chief economist James Sproule, who has been calling in vain for a rate hike, says:
"Caution won out again at the Bank of England today, with the Monetary Policy Committee spooked by a worsening outlook for global growth. But, with strong consumer confidence and wages on the up, the arguments against raising interest rates from the current exceptionally low level are falling away."
2.39pm GMT
And so it begins...
JP Morgan forecast that #BoE rate rise will not happen until Q2 2016 (Prev. saw Q1 2016)
2.31pm GMT
Savers should brace for interest rates to stay at record lows until perhaps 2017, says Maike Currie, associate investment director at Fidelity International.
"Super Thursday has quickly turned into Superfluous Thursday.
It's now 80 months and counting since the Bank of England has failed to push the button on rising interest rates with its surprisingly dovish stance today....
2.28pm GMT
Kallum Pickering of Berenberg Bank has kindly sent a chart, showing how the BoE cut its growth forecasts today:
2.26pm GMT
The FT's Chris Giles reckons Carney attempted a repair job during today's press conference, which was more hawkish than the actual Inflation Report.
Carney has spent press conference rowing back on the inflation report's dovishness. Does BoE not know how its words will be received?
2.09pm GMT
The pound has been thumped against all major currencies since the Bank of England unleashed its unexpectedly dovish inflation report.
That highlights that investors expect rates to remain at record lows for at least another year.
GBP taking a decent beating #BoE pic.twitter.com/E2uQHXws9c
2.07pm GMT
If this was a "Super Thursday" club night*, you'd probably be entitled to a refund.
So, Not-So-Super Thursday, huh?
2.06pm GMT
Press conference over. Hacks scramble back to base, Mark Carney and colleagues return to protecting the monetary affair of the nation.
I'll pull some reaction together now.
2.03pm GMT
Business Insider's Mike Bird asks Carney about the possibility that UK interest rates could be lowered from 0.5%.
He cites recent comments from ECB chief Mario Draghi on this issue of zero interest-rate policy, suggesting that borrowing costs could go lower than previously thought.
cmon. How big do you think the Gap Kids shirt-tie range is?RT @econhedge: FFS ANOTHER shirt disaster from @birdyword pic.twitter.com/0auUblSF2G
1.47pm GMT
Q: What discussions has the BoE had with other central banks about the possibility that monetary policy diverges next year, with the UK and US may raising rates while the eurozone and Japan could get more stimulus?
It feels like we meet almost continually, says Carney wearily. We'll be meeting again next week in Basel.
There is no major central bank that knows what it is going to do at its next meeting.
They all have frameworks and objectives, and the factors that influence its decisions.
The only time that was different was the depth of 2008, when we agreed to do certain things.
1.38pm GMT
Yield curves (which show investors' expectations of rate hikes) have not matched up to the Bank's own forecasts. So how worried is the governor that he's losing credibility in the markets?
Carney insists that he's "not at all" concerned about this. One can read too much into market yield curves.
1.31pm GMT
Q: Some of this summer's market mayhem was caused by speculation that US interest rates might rise soon, so are central banks making the situation worse?
Deputy governor Minouche Shafik agrees that there was significant volatility this summer - with the VIX index (which measures this) hitting its highest level since 2011.
1.28pm GMT
Our Katie Allen asks Carney about the Bank's belief that the UK economy is 'resilient' despite the government's fiscal consolidation (George Osborne's ongoing attempts to eliminate the deficit).
Q: Should we expect major changes to these forecasts in February, once we've seen the Autumn Statement?
Carney says latest forecasts based on spending cuts we already know about - fiscal consolidation he describes as "material" and "meaningful"
1.24pm GMT
What are households expect to make of things?
Many people expect rates to go up in the next year, Carney replies, and that's a "reasonable" idea.
Carney: surveys show ca 2 3rds of housholds expect rates to rise over next 12 months, "that is a reasonable expectation" given these fcasts
1.21pm GMT
Governor Carney isn't spoiling us with too many straight answers.
I don't think I've ever seen as much Central Bank tapdancing as this QIR from Carney
BoE Carney: Well, erm, I'm not, eh, of course, well, it's right, but it's not a commitment, so, after the year, erm, I may not, hmm, raise
1.20pm GMT
Here's the proof that the markets have been consistently wrong about UK interest rates going up:
How market expectations for interest rate increases have shifted back, and back, and back" pic.twitter.com/tcoyOKGSbp
1.17pm GMT
Chris Giles of the Financial Times points out that house price inflation is running at 9% (according to the Halifax).
So, does the Bank need to unleash some macro-prudential tools to cool the housing market while it leaves rates so low?
BoE presser karaoke. Hi, @ChrisGiles_ pic.twitter.com/n95MGRlSAp
1.12pm GMT
Carney asked about fed talking about dec hike, and whether BoE could give such guidance for h1 2016: "we will take a decision each month"
1.12pm GMT
Q: The Federal Reserve says it could raise interest rates in December; Could the Bank of England say the same about the first half of 2016?
Mark Carney won't be lured into any predictions.
1.10pm GMT
Sky News Ed Conway's asks whether we should even bother looking at market expectations for bank rate (a key part of today's inflation report).
Five years ago, market expected rates to be 3.75% today. A year ago, they expected 1%, so should we stop paying attention?
"There are deep global forces that were at work here - including demographics"
1.05pm GMT
Our ambition is to return 'sustainably' to the inflation target, Carney says, rather than blunder by trying to fight the 'persistent' factors keeping prices low.
1.03pm GMT
The length of the Carney reply to the @peston question indicates how much waffling and spinning is going on here #BoE #InflationReport
Carney : "Progress in terms of normalisation has been mixed"
Central bank-ese for "haven't a Scooby" https://t.co/ueeMr8nX8W
1.01pm GMT
Robert Peston has the microphone, and uses it like a laser beam to target Carney's credibility.
Q: Do you regret telling the public that the decision over UK interest rates will come into 'sharper relief' at the turn of the year?
We have a situation where there is mixed progress, but there is progress.... towards monetary normalisation.
12.58pm GMT
Onto questions:
Q: Not much appears to have changed in today's Inflation Report, but there's a big reaction in the markets. Why?
12.55pm GMT
Now this is interesting. Carney says that the Bank expects to keep its stock of UK government bonds until interest rates have reached a level where they can be cut.
That means the BoE won't be unwinding QE until rates have hit 2%.
12.54pm GMT
There are a range of views among the monetary policy committee over the balance of risks to inflation, says Carney.
12.53pm GMT
BoE Carney repeats from report intro:in contrast to global picture &despite ongoing fiscal consolidation domestic momentum still resilient
12.52pm GMT
Mark Carney confirms that UK inflation is expected to remain below 1% until the second half of 2016, citing factors such as cheaper commodity prices and other imported goods prices.
12.52pm GMT
12.50pm GMT
"Remember, remember the 5th of November" grins Mark Carney as the press conference begins (maybe he'll hand out some toffee apples later #hint)
So what's memorable about today? There are some familiar themes - inflation remains low, rates remain unchanged, and it's another 8-1 split.
Carney says broad outlook from August intact, downside risks to global outlook including more "abrupt" changes in China
12.46pm GMT
The Bank of England press conference is starting now - you can watch it live here.
Economics editor ITV's Robert Peston (BBC today, ITV soon) is preparing to give Carney a grilling
So interest rates now signalled as not rising for year - so does Bank gov regret preparing us for possible rise early in new year? I'll ask
12.44pm GMT
Here's Katie Allen's story on the Bank of England rate decision:
The Bank of England has sent a reassuring message to businesses and households that interest rates are to remain at their record low well into next year as it cut its forecast for near-term inflation.
The central bank signalled in its latest Inflation Report that interest rates would need to rise at some point from the current 0.5%, but it gave no indication a move was imminent and reiterated that when borrowing costs do go up, they will do so only gradually.
Related: Bank of England leaves interest rates at record low of 0.5%
12.39pm GMT
The Bank also flags up that market expectations of future interest rate rises have fallen since August:
It says:
Short-term interest rates in the United Kingdom, United States and euro area were lower in the run-up to the November Report than three months earlier.
While some of those falls may reflect lower expectations of the most likely path for policy, given the weaker outlook for global growth and inflation, some could also reflect increased perceptions of downside risks.
12.37pm GMT
This chart explains why the Bank of England is worried about emerging markets:
12.36pm GMT
The Bank's new quarterly inflation report is online here (as a pdf).
It is packed with interesting charts.
As in August, Chinese growth is projected to continue to moderate gently in the near term. But recent financial market developments have highlighted the challenges faced by the authorities in maintaining growth while both liberalising and rebalancing the Chinese economy.....
A sharp slowing in China could affect the UK economy.
12.33pm GMT
UK inflation just a tiny slice above target in 2 years based on market assumptions. BoE in no hurry to hike rates.
12.33pm GMT
Carney also told Osborne that inflation should start to pick up, from zero, in early 2016:
Carney:"In the absence of further falls in commodity prices, inflation rates close to zero are unlikely to endure much beyond the end of yr"
12.30pm GMT
The Bank has also released a letter from governor Carney to chancellor George Osborne, explaining why he hasn't managed to keep inflation on target.
He blames international factors such as cheaper oil and metals, the strength of sterling (pushing down the cost of imports) and limited earnings growth (although real wages are finally rising).
BoE also released open letter from Carney to chancellor on why inflation off target.cites lower commodity prices, stronger pound, soft wages
12.26pm GMT
This chart of inflation forecasts shows exactly why the Bank isn't rushing to raise borrowing costs:
Here's @bankofengland's latest CPI forecast, based on market interest rates: no surprise Ian McCafferty's a loner: pic.twitter.com/oImqr6Xs8s
12.24pm GMT
The key message from the Bank is that the UK still needs record low borrowing costs to ward off the global downturn:
BoE forecasts see need for lower interest rates to boost household and corporate spending in face of weaker global economy
12.21pm GMT
Peter Hemington, partner at accountancy firm BDO LLP, says the Bank of England made the right decision, given signs that UK growth is weakening amid a global slowdown.
"With rates so low, policymakers must act to insulate the UK economy from the increasingly gloomy global economic outlook. So far our recovery has largely been based on consumer spending, but we need business and public sector investment if we are to rebalance the economy, boost productivity and make sure that companies thrive across the country.
This will put the economy on the firmest possible footing for the potentially shaky months ahead."
12.16pm GMT
You can read the minutes of today's meeting yourselves, here.
12.15pm GMT
The Bank also reminds us that when (but when?!) Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles.
12.14pm GMT
The Bank of England remains fairly optimistic about the domestic UK economy.
The minutes say:
Domestic momentum remains resilient. Consumer confidence is firm, real income growth this year is expected to be the strongest since the crisis, and investment intentions remain robust. As a result, domestic demand growth has been solid despite the fiscal consolidation....
Robust private domestic demand is expected to produce sufficient momentum to eliminate the margin of spare capacity over the next year.
12.10pm GMT
DOWN GOES THE POUND.
Sterling is tumbling like a wounded hawk, as traders scramble to react to the Bank's downgraded forecasts.
Pound sliding pic.twitter.com/EPbCUxe54W
12.09pm GMT
The Bank has also cut its inflation forecasts.
It now expects the Consumer Prices Index to remain below 1% until the second half of 2016, far from the official target of 2%.
12.07pm GMT
The Bank of England has also cut its forecasts for economic growth in 2015 and 2016.
In a gloomy statement, it reveals that it is less optimistic about the UK economy.
The outlook for global growth has weakened since the August Inflation Report. Many emerging market economies have slowed markedly and the Committee has downgraded its assessment of their medium-term growth prospects.
While growth in advanced economies has continued and broadened, the Committee nonetheless expects the overall pace of UK-weighted global growth to be more modest than had been expected in August. There remain downside risks to this outlook, including that of a more abrupt slowdown in emerging economies.
12.03pm GMT
Bank of England maintains #BankRate at 0.5% and the size of the Asset Purchase Programme at 375 billion...
12.03pm GMT
The BoE also voted 9-0 to leave its quantitative easing programme unchanged, meaning it will still hold 375bn of UK gilts.
12.02pm GMT
Ian McCafferty was the only MPC policy maker to vote to hike to 0.75% again.
That has dashed speculation that Kristin Forbes or Martin Weale would join him on the hawks perch.
12.00pm GMT
BREAKING: The Bank of England has voted 8-1 to leave interest rates unchanged, at the current record low of 0.5%.
11.59am GMT
A Bank of England official is phoning the speaking clock right now.... (seriously).
ONE MINUTE TO GO!
11.54am GMT
Spoiler alert:
The BOE hold is coming up in 9 minutes.
11.52am GMT
Reminder: We get the monetary policy decision at noon, along with the latest quarterly inflation report. Then there's a 45 minute wait until Mark Carney faces the press pack.
Bank Of England Super Thursday on deck: Interest Rates, Inflation Report, and of course... Mark Carney. #BOE #Carney pic.twitter.com/MHdqmYZpkr
11.49am GMT
Over at the Bank, they'll be putting the finishing touches to their announcements -- we can expect some rapidfire tweeting once the clock strikes 12.
11.19am GMT
Here are some key points to watch for from the Bank of England today:
10.54am GMT
The mood in the City is rather subdued today, as investors wait for the Bank of England to unleash a plethora of announcements and reports at noon.
The FTSE 100 has lost 27 points, under-performing the rest of Europe. It's been pulled down by the mining sector, and supermarket chain Morrisons which posted a 2.6% drop in sales.
Last quarter's Super Thursday was not that super and it is difficult to see where the shock and awe will come from this time round. City traders will have to digest a plethora of data in quick succession, with a rate decision, policy minutes and the inflation report all followed by a speech from Mark Carney.
We might see another member vote for change but other than a 7-2 result it would be hard to see any change being viewed as anything other than forced.
10.34am GMT
Despite the emissions scandal, Volkswagen still had two cars in the top-ten bestsellers in the UK last month.
This chart from today's report shows that Golfs and Polos remained popular:
"It could have been a lot worse" a source at VW tells me. "UK sales are pretty robust". VW's Golf and Polo models moved up the best-seller list.
VW sales in UK slumped last month. Evidence that customers are shunning the brand? Not really. Read on: https://t.co/kHGq323493
10.18am GMT
Experienced City economist George Magnus, adviser to UBS, is on Bloomberg TV now, arguing that there is no reason for the Bank of England to raise rates yet.
The danger if the Bank steals a march on the Fed it could push up the pound, which is bad for manufacturing.
UBS Senior Economic Advisor @GeorgeMagnus1 tells us on @bsurveillance it would be worrisome if the BoE were to steal a march on the Fed.
10.00am GMT
Two hours to go until the Bank of England begins the Super Thursday party:
'Remember remember, the fifth of November.' BoE Super Thursday kicks off in 2-hours: rate decision, minutes, and Quarterly Inflation Report.
9.50am GMT
The SMMT says it is too early to tell if the drop in VW sales is due to the emission scandal.
9.23am GMT
UK SMMT 177,664 new cars were registered in the month, representing a slight decrease of 1.1% Food for thought for the Bank of England #GBP
9.21am GMT
Mike Hawes, SMMT Chief Executive, argues that the UK car sector is still robust, even though sales growth has finally dipped.
"The UK car market has gone through a period of unprecedented growth and, so far, 2015 has been a bumper year with the strongest performance since the recession.
As expected, demand has now begun to level off but the sector is in a strong position, as low interest rates, consumer confidence and exciting new products combine to attract new car buyers. The current full-year growth forecast remains on track."
9.18am GMT
Volkswagen sales in the UK have fallen, suggesting the company has been hurt by the news that it faked emission test results.
Sales of Volkswagen-branded models tumbled by 9.8% year-on-year in October, from 15,495 to 13,970, according to the SMMT's new report. That means its market share shrank from 8.62% to 7.86%.
#Volkswagen UK sales fall in October - market share falls by almost 10%. @SMMT
9.06am GMT
Just in. UK car sales have fallen, for the first time since early 2012.
The Society of Motor Manufacturers and Traders reports that new registrations were down 1.1% in October, compared with a year ago.
8.59am GMT
Jeremy Cook, chief economist at currency firm World First, reckons UK interest rates will remain at their record lows for another six months.
#SuperThursdayGuesses Today to solidify expectations, Feb to signal its coming soon, and May to hike. Slowly, slowly catch the Carney
#SuperThursdayGuesses Possibility that Forbes joins McCafferty, minutes focus on solid yet unspectacular growth, inflation from base effect
8.45am GMT
London newspaper City AM runs a 'shadow MPC', asking nine senior economists how they would vote.
And this month, it has split 6-3, with a trio calling for a rate hike.
Raise. Corporate liquidity is surging. Private pay growth is over three per cent, while productivity remains sluggish. Global risks have faded.
I am one of 3 members of @CityAM MPC to vote for a rate rise: https://t.co/Jc3fvsJBk9. How many on the real #MPC will follow suit today?
8.30am GMT
Here's a handy chart showing which BoE policymakers appear keen to raise rates soon, and which are reluctant....
The MPC Member Spectrum, from doves to hawks - loving it @business Intelligence & @JMurray804 pic.twitter.com/e92uNcMAyr
8.22am GMT
Some economists believe that divisions at the Bank of England over interest rate policy will widen today during Super Thursday.
At recent meetings, the monetary policy committee has split 8-1, with only Ian McCafferty voting to hike borrowing costs from 0.5% to 0.75%.
It's Bonfire Night, and if there are fireworks here, it will be in the vote.
Kristin Forbes has been very hawkish of late, and she may go and join McCafferty, and possibly Martin Weale too.
8.05am GMT
Today is probably the Bank of England's last chance to prepare people for an interest rate hike early next year.
Brian Hilliard, chief U.K. economist at Societe Generale, explains:
"It's make or break for clear communication on a first-quarter rate increase.
"If it is going to happen in February they're going to have to send a strong and clear signal."
8.00am GMT
As if the Volkswagen scandal wasn't bad enough, Germany's factories have also suffered another drop in demand orders.
New orders in #manufacturing in Sept. 2015: -1.7% seasonally adjusted on the previous month https://t.co/M4w7zCGPeN pic.twitter.com/f9LrOoQRFV
German new orders down for the third straight month. No more excuses except domestic demand still bit stronger.
Three months in a row with month-on-month declines over 1%. Last time that happened was November 2011. #NichtGut https://t.co/FJNBjodjlb
7.50am GMT
We have firm evidence that the emissions scandal has hurt Volkswagen, from South Korea.
7.34am GMT
Happy Super Thursday!
#UK economy today: BOE rate decision, minutes, Inflation Report
Related: VW could face billions in car tax repayments over latest CO2 scandal
Grim retail. Morrisons - total sales down 2%; like-for-like sales down 2.6%; food deflation -2.2%. Every figure in trading statement is -ve
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