The Bank of England and the European Central Bank both
announced their interest rate decisions this morning, with the
Bank of England holding rates and the European Central Bank doing
the same. The Banks were both not expected to act at these
meetings and met expectations.
The Bank of England decided to keep its benchmark interest
rate flat at 0.5 percent and kept its asset purchase program
constant at 375 billion pounds (~$600 billion). The Bank did not
release a post-meeting communiqué but its inflation and output
projections will be released on Wednesday, November 14 in its
Inflation Report. Also, the minutes of the meeting will be
released November 21.
The European Central Bank also decided to leave rates
unchanged, as expected. Some economists had been hinting that a
rate cut was coming but swaps markets were not pricing in a large
probability of a cut heading into the release. In the released
communiqué, the Bank said that it kept the main refinancing rate
at 0.75 percent, the marginal lending rate at 1.5 percent, and
the deposit rate at 0.0 percent.
Markets took the news in stride as the results were widely
expected. The British pound did gain slightly after the BoE's
release as some traders betting on a rate cut had to cover
shorts, however moves were capped just below 1.60 in the GBP/USD
cross. The euro remained lower against the dollar after the ECB
announcement, trading just below 1.2750, where it has traded for
the past few hours. Gold futures rose slightly to $1,718.20 or a
gain of 0.25 percent.
To note, European Central Bank President Mario Draghi is set
to hold his post-meeting press conference at 8:30 am eastern. It
is at these press conferences that he has previously launched
non-traditional policies such as the OMT. This time, Draghi could
comment on the state of the program and potentially give an
update on the status of Spain's decision on a bailout or the
recent reports over Spanish banks potentially facing a 17 billion
euro collateral call.
The lack of action from the two central banks follows weak
economic data over the past few weeks including manufacturing and
service PMI's. However, bankers may be thinking that recent rate
cuts and other policy measures such as the BoE's Financing for
Lending Scheme may still need time to see the full effects of
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