It was a case of some good and some bad for sterling yesterday. The Bank of England narrowly voted to keep interest rates unchanged at 4%, although in a positive sign for borrowers, Governor Andrew Bailey stressed that he believed inflation would come down alongside wage growth.
The Monetary Policy Committee’s five-four vote in favour of a hold was even closer than predicted. Was the upcoming autumn Budget the deciding factor in this caution? It certainly seemed to play a part, with Bailey having to parry several questions from the press and reiterate the fact that the Bank makes decisions on announced policy, not hypotheticals.
As you might expect on interest rate day, the pound flitted up and down over the course of Thursday’s trading. Ultimately, it would end proceedings stronger against both the euro and the US dollar, but still well below where it was just a few short months ago.
This morning, we learned that house prices increased by 0.6% in October, per the Halifax house price index. The annualised rate of growth now sits at 1.9%, with buyers using longer terms and smaller deposits to cover high mortgage rates.
Staying on the theme of housing, UK construction activity tumbled at its fastest rate in five years last month. According to an influential survey conducted by S&P, buyers are buying time and delaying purchases amid huge uncertainty.
The impact of the AI revolution is already being felt in the American job market, where the number of job losses in October reached a 22-year high. Cost-cutting, AI and DOGE, the White House’s efficiency task force previously led by Elon Musk, were the most common explanations.
Governor Bailey was also asked about the potential of an AI asset bubble at Thursday’s press conference. “The markets could overprice the returns, but the returns could still be substantial”, he said, perhaps soft launching his next career as a politician.
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