Tomorrow sees probably one of the most important policy decisions from the BoE in recent history as futures markets have priced in a 100% chance of a cut in rates; to the lowest level on record. The Brexit effect has seen a deterioration in the UK’s economic fundamentals; business confidence now sits near financial crisis levels, manufacturing shrank at its fastest pace in three years in July and construction has rapidly contracted. No doubt the central bank will forecast much lower growth and higher inflation in the UK for the next couple years. In fact, the IMF slashed its growth forecasts for the UK to 1.7% in 2016 and 1.3% for 2017. Interestingly though, despite these being some of the sharpest downgrades, the IMF still expects the UK to expand at a faster rate than Germany and France for example.
On Thursday the Bank of England will announce its interest rate decision and it looks increasingly likely that the Monetary Policy Committee (MPC) will cut rates for the first time in more than 7 years. The committee have already signalled that rates would most probably be cut after surprisingly leaving them unchanged at the last meeting. Gertjan Vlieghe, who is an external member of the MPC, was the only policy maker to call for a cut last month, is also now calling for a package of stimulus measures to help growth.
Today’s Bank of England (BoE) Financial Stability Report demonstrates a few silver linings amongst the “significant near-term domestic risks to financial stability… [that] risks have begun to crystallise”.
Take heart, not all is woe and stagnation amongst the miscellany of British people and its economy. Tonight Wales face Portugal with a respectable chance to reach the Euro 2016 finals, a Scotsman Andy Murray also looks likely to reach the Wimbledon Men’s semi-finals, the FTSE 100 is undergoing a bounce, advertising companies across London have received a surge of business from French and German clients, and legal and trade experts are being hired a-plenty.
According to figures released on Monday by the Bank of England (BOE), bank lending to consumers expanded at its fastest rate in November 2015 in almost a decade. The BOE said net lending in the penultimate month of last year was up nearly 8.5% compared with a year earlier. This is the biggest increase since February 2006. In cash terms nearly £1.5bn more was lent compared with October, beating analyst estimates. Unsecured credit grew by 8.3% year on year.