BOE leaves bank rate unchanged at 0.75%

Darnell Taylor
November 7, 2019

London's benchmark FTSE 100 stock index was last up 0.13%, in line with a weaker pound and as other European markets gained on signs of progress in U.S.

Economists believe that the BoE will address the outlook by next year, though, as the signs have all been pointing to a weaker United Kingdom economy, As of now, markets believe there is a 55% likelihood of at least one rate cut of 25 basis points next year.

The Bank of England's Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment.

US-China trade developments will also remain in focus, and with any indications that the world's two largest economies can make a concession on a "Phase 1" trade deal this month could boost optimism in the Eurozone's economy, which relies heavily on global trade stability.

Looking through Brexit-related volatility, underlying UK GDP growth has slowed materially this year and a small margin of excess supply has opened up. As expected, it kept the UK Bank Rate at 0.75%.

Committee members Jonathan Haskel and Michael Saunders called for a quarter-point rate cut as Britain faced the continued uncertainty over Brexit.

There are huge uncertainties to the forecasts, though, not least because the December 12 general election has the potential to radically alter Brexit.

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"If downside risks emerge to United Kingdom economy, there may be a need to provide reinforcement but this is not pre-committing".

For the others, Britain's economy had not performed much differently than they had expected three months ago but they showed a new openness to cutting rates if things soured.

However, its latest dovish forecasts said rate-setters "may need to reinforce the recovery" - a huge hint of further stimulus - if global growth fails to recover and Brexit uncertainties "remain entrenched", threatening a fresh potential blow for. GBP/CAD surged over two cents from 1.6751 to 1.6995.

So for Sterling there is the possibility that a lot of a good news that was built into the price in October could start to seep out, 'CAD Exchange Rates Pressured amid Trade and Bank of Canada (BoC) Uncertainties While the Canadian Dollar is up against the Pound so far this week, this is largely due to hopes that the USA and China are closing in on a preliminary trade deal that could be completed in the coming weeks.

The BoE now assumes Britain will strike a trade deal that leads to new customs checks and puts up barriers to exports of financial and legal services.

Overall, it said, the United Kingdom economy will grow by 1% less over the next three years than it thought at the time of its previous forecasts in August.

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