All eyes are on the Bank of England today as it prepares to announce its latest monetary policy decision at noon UK time. But for once interest rates are not on everyone’s mind.
The BoE is widely expected to leave the Bank Rate unchanged at 4%, a day after UK inflation remained painfully high over its target at 3.8%.
The real focus is whether the BoE adjusts its bond-selling programme, giving a helping hand to chancellor Rachel Reeves.
Under that “quantitative tightening” (QT) programme, the Bank has been selling some of the government bonds it bought during the financial crisis and the Covid-19 pandemic. QT has come under growing criticism for pushing up borrowing costs – as the Bank’s steady selling has weighed on bond prices, which in turn lifts bond yields.
The Bank is due to make its annual assessment of QT today, and many City economists expect it to slow the unwinding process. A slowdown in gilt sales would help Reeves by easing the pressure on elevated gilt yields, which hit a 27-year high last month. Lower yields could help give the chancellor some headroom in her autumn budget calculations.
Last night, the Federal Reserve cut US interest rates for the first time this year, responding to signs that America’s jobs market is weakening.
Today’s key events
• 9.30am BST: Norges Bank to set Norwegian interest rates
• Noon BST: Bank of England monetary policy decision
• 1.30pm BST: US weekly jobless claims data.
We’ll be tracking all the main events throughout the day on our business live blog …
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