Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s Bank of England Day! Britain’s central bank finds itself on the horns of a painful dilemma today, as policymakers meet to set interest rates.
Already this week, the BoE has seen inflation spike back to 2.9%, a four-year high, increasing the pressure to raise borrowing costs. But that was swiftly followed by yesterday’s depressing earnings figures, showing that wage growth remained sluggish at 2.1%.
With real wages still falling, British households trapped in a cost of living squeeze, and Brexit uncertainty still clouding the economy, can the Bank really hike interest rates today?
The City thinks not; economists expect rates to remain at their record low of 0.25%.
But at least two policymakers on the Monetary Policy Committee are likely to vote for a rate hike. There’s even a chance that Michael Saunders and Ian McCafferty could be joined by a third hawk, chief economist Andy Haldane.
It seems likely that the Bank will warn that it can’t tolerate higher inflation for ever.
Royal Bank of Canada’s analysts say:
Following news of the faster-than-expected rise in CPI inflation this week to 2.9% y/y, and the already flagged limited tolerance for above-target inflation, it seems likely that the meeting minutes will have a hawkish tinge to them.
Given that this was also followed by news that average earnings growth stagnated at 2.1% 3m/y, concerns about the limited scope for consumer spending momentum could balance out the upside news on inflation.
So all eyes will be on the Bank of England at noon today.
On a lighter note, the Bank is also launching its new £10 note – featuring Jane Austen.
There’s also a flurry of UK company news this morning, with John Lewis, Next and Morrisons all reporting results.
At first glance they look mixed, with John Lewis reporting falling profits but Morrisons saying its turnaround plan is working…. More to follow.
European stock markets are expected to dip at the open, wit the FTSE 100 called down 0.1%.
Here’s the agenda
- 8.30am BST: Swiss National Bank interest rate decision
- 12pm BST: Bank of England interest rate decision
- 1.30pm BST: US inflation figures for August