The dovish tone of both Central Banks continued this week. The slower growth globally has finally led to the markets revising its forecasts for the year not only for a rate hike for the BoE but also the Federal Reserve. The Fed earlier in the week slashed 50bp from its median expectation for rates by the end of 2016. Earlier in the year some optimistic economists’ were expecting four rate hikes throughout the year. There has been a similar picture on the fiscal front and this was evident in the UK budget, where Chancellor George Osborne had to push out further into the future the point at which the UK was expected to turn in a budget surplus, with more being borrowed in the intervening years.
Closer to home, as expected the Bank of England left their monetary policy unchanged, the minutes of course were heavily scrutinized for signs that a rate cut is being considered. However, the rhetoric was not as expected as the BoE leaned towards a rate rise rather than a rate cut, boosting the Pound yesterday afternoon. The BoE also said that the “BREXIT referendum may delay some spending decisions and slow growth in the near term” and the committee “remain watchful for signs for low inflation”.
We finish the hectic week with a relatively quiet day in the markets. The only notable release today is from the US in the form of the University of Michigan Consumer Sentiment, forecast to tick slightly higher to 92.1.