The Bank of England decided to hold interest rates at 5.25% at its March meeting, but a significant shift in the voting of Monetary Policy Committee (MPC) members set markets ablaze.
None of the MPC’s nine members voted to increase interest rates at this meeting, whereas two voted for this step at their last conflab. It’s slightly strange that otherwise serious people could get this excited about a nine-person vote, but it does have a genuine impact on almost everyone in the economy, from businesses and banks to homeowners and buyers. To many, this marked a key milestone and signified that interest rate cuts were on the horizon.
This morning, BoE governor Andrew Bailey was splashed all across the Financial Times. In an interview, Bailey said markets were correct to assume there would be multiple rate cuts this year and that there was “an increasingly positive story” with inflation.
Following the Federal Reserve’s decision on Wednesday, the majority of experts are now predicting three rounds of 0.25% (25 basis points, if you want to get really technical) rate cuts from both central banks over the course of this year. That’s down from what had been expected in January, but there were fears that the Fed in particular would be blown off course by strong jobs and earnings data.
GBP/EUR struggled to bat away a wave of selling after the decision, losing 0.4% over the course of Thursday and GBP/USD fell by around 1%. The euro also found some success against the US dollar but fell back during an afternoon rally.
Germany’s flash HCOB manufacturing PMI for March came in below expectations at 41.6. That was well below last month’s 42.5 and predictions of anywhere from 43.1 to 44.
The UK reported a slight dip in the flash read for S&P’s Global Services PMI. That number dipped to 53.4 in March although it remains well ahead of similar metrics in the eurozone. There were a handful of other minor economic releases yesterday, primarily from the US, but they were greatly overshadowed by the Bank of England.
Stock markets were on cloud nine as interest rates dominated discussions. In London, the FTSE 100 climbed by almost 2%, while on Wall Street, the S&P 500 and the NASDAQ both set record highs.
In news you may not have expected, the US government have decided to sue Apple. Justice department lawyers claimed the tech giant had unlawfully and knowingly maintained a monopoly on the smartphone market in a shock lawsuit.
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