Bank of England Pauses Monetary Tightening

In what was a finely balanced decision, Bank of England (BoE) policymakers held their policy rate steady at 5.25% at today's monetary policy announcement. In a significant change, the BoE said there were mixed developments on indicators of inflation's persistence, noting slower varied signals on wage growth and slower services inflation.

Bank of England Review: End to the Hiking Cycle, But Not GBP Headwinds

The Bank of England (BoE) decided to keep the the Bank Rate (key policy rate) unchanged at 5.25%. Five members voted for an unchanged decision while four members voted for an increase of 25bp. On gilt stock reduction, the BoE set a target of a reduction of GBP 100bn for the next 12 months (up from 80bn the past 12 months).

BoE Joins the 'Done With Hikes' Team

The Bank of England has left its key interest rate unchanged at 5.25%. The likelihood of such an outcome was actively priced into Pound quotes following yesterday’s UK inflation report.

Was that the End of Hiking Cycle?

Central banks: Bank of England and the Swiss National Bank surprised us and the market by refraining from raising interest rates further yesterday. The Riksbank and Norges Bank both hiked policy rates 25bp. While the door is still open for more hikes from all four, we think they are all done increasing interest rates.

Hawkish Fed vs Dovish Others

The Swiss National Bank (SNB) and the Bank of England (BoE) surprised by maintaining their rates unchanged at yesterday’s trading session. The Bank of Japan (BoJ) surprised by maintaining its ultra-lose monetary policy stance unchanged. Combined with a hawkish pause earlier this week, the major currencies further sank against the greenback.

USD/JPY Returns to the 148 Area

The BoJ left its policy unchanged this morning even as national inflation data suggested persistent above target inflation (CPI ex fresh food 3.1%, core 4.3%). The 10-y Japanese government bond yield (0.75%) is holding near its recent top. USD/JPY returns to the 148 area. Regional equities are holding up rather well given the WS sell-off.

Week Ahead – Fed, BoE, BoJ, SNB, SARB, CBRT and More to Look Forward To

The main event of the week will be the September FOMC meeting. Powell and Co. are expected to keep rates steady but may still signal one more rate increase is coming.  Too many upside surprises with service/jobs/consumer readings will keep the Fed upbeat on the economy, forcing them to revise up their GDP forecasts and to price in one more rate hike.

The Weekly Bottom Line: Canada – Waiting in Inflation Limbo

We can't fault Canadian investors for peeking south of the border for an indication of what the Bank of Canada (BoC) is going to do next. The stronger than expected U.S. CPI print may provide a good guide for Canada's CPI release next week. The expected rebound in Canadian inflation has raised bets of another BoC hike by year-end. Canadian yields have subsequently kept pace with their U.S. equivalents this week, putting a floor under the loonie at 73 U.S. cents (Chart 1).

Weekly Economic & Financial Commentary: FOMC to Stand Pat, but Keep Door Open to Possibility of Further Hikes

The FOMC is widely expected to keep the fed funds target rate unchanged at 5.25-5.50% at its upcoming meeting as inflation has more clearly started to slow. However, with price growth still running well-above target, we expect the hold to be delivered with the message that further policy tightening is possible if incoming data warrants it.

EUR/USD Breaking Below 1.0633 Would Further Hurt the Technical Picture.

The dollar took a breather on Friday, but remains in pole position. EUR/USD breaking below 1.0633 would further hurt the technical picture.