Yesterday’s Bank
of England monetary policy statement carried no real surprises. There was no
change to either the interest rate or the asset purchase facility. Reading the
minutes of the Monetary Policy Committee (MPC) meeting one could be forgiven for thinking that
there is a sense of exhaustion on the part of the members as they wait for some
kind of solid evidence that the economy has reached a stage where monetary
policy can be normalised – that is to say that interest rates can start to rise
from their current unnaturally low levels.
The big
bugbear is still inflation, or the lack of it. The minutes acknowledge that unemployment
levels are quite good, but the effects of this on the economy are more than
offset by the fact that there is no pressure for wage rises. This is a worry as
the fact that so many are working will do nothing to raise inflation.
Sterling
took a hit on the release of the statement and minutes, although it later
recovered somewhat. Perhaps the part of the minutes which concentrated on what
would happen when and if rates do start to rise was a factor in the drop. From
the release:
“All members
agree that, given the likely persistence of the headwinds weighing on the
economy, when Bank Rate does begin to rise, it is expected to do so more
gradually and to a lower level than in recent cycles”.
U.S. Retail Sales are out today
The latest
report on retail sales in the US will be released later today. As always, this
will be closely watched, but even more so on this occasion as there was some
concern about the level of sales on the so-called “Black Friday” (November 27th),
the ‘official’ start of the Christmas shopping season, when retailers are
supposed to break out of the red and into the black on their profit and loss
accounts for the year.
We will see
later today if this was likely to be the case.
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