020 7898 0500The Bank of England (BoE) unanimously voted to leave its main interest rate at the historically-low level of 0.25%. Last month they had cut the rate by half, which was the first time interest rates had been adjusted since 2009. The bank has indicated there is room for a further cut, which could see sterling interest rates tumble into negative territory.
According to the meetings from the BoE’s Monetary Policy Committee (MPC), ‘a number of indicators of near-term economic activity have been somewhat stronger than expected’. The MPC added that if its economic forecasts in November were similar to those it had formulated in August, ‘a majority of members expected to support a further cut in the bank rate at one of the MPC’s forthcoming meetings during the course of the year’.
Although the Bank isn’t as gloomy as it was pre and post referendum the possibility of a further cut weighed down on sterling and stopped any significant sterling rally. This caused fluctuations in what had been a weak week on the whole for sterling.
Also out yesterday were retail sales figures, which were stronger than expected in August, suggesting consumer confidence has yet to take a hit after Brexit. Sales volumes had fallen by only 0.2% and were up 6.2% from August last year; these figures appear to disprove the doom and gloom that was forecasted by the Remain campaign, although the true impact is likely to be felt only after a couple of quarters. Some analysts have said that the retail sales data has been boosted by sterling’s fall during the summer months, which resulted in increased tourist spending during the holiday period.
Today is a quieter day for the UK in terms of economic announcements and data releases. Sterling markets may still be digesting news from yesterday; other than this, any sterling movements are likely to have been influenced by events elsewhere.
