The Bank of England Leaves Rates Unchanged

The Bank of England left its repurchase rate unchanged at 25 basis points as widely expected. The monetary policy committee is expecting less of a slowdown that previously though following the Brexit vote in June. The central bank lifted its Q3 GDP forecast to +0.3% quarter over quarter from the 0.1% growth estimated in August. The MPC also voted, unanimously, to maintain the QE program at GBP 70 billion per month.

European stock markets are slightly higher with the FTSE 100 outperforming slightly following BoE meeting. U.S. stock futures are moving higher, following a mixed session in Asia, where Hang Seng and ASX closed in positive territory, while Japanese markets sold off as the Yen strengthened and investors held back amid uncertainty about the global central bank outlook. Oil prices are up from lows, and slightly above 44 per barrel.

UK August retail sales came in better than expectations slipping 0.2% month over month, above the median forecast for a 0.4% month over month decline following July’s 1.9% month over month gain. Sales rose 6.2% in the year over year comparison. The ONS reported that, despite the month over month dip, the underlying pattern in the retail sector remains one of “solid growth.”

Oil prices are slightly higher but dropped below 44 despite an unexpected draw in crude oil inventories reported by the Department of Energy on Wednesday. According to the EIA, U.S. commercial crude oil inventories decreased by 0.6 million barrels from the previous week. The EIA reported that gasoline inventories increased by 0.6 million barrels last week. Distillate fuel inventories increased by 4.6 million barrels last week and as we move into the heating season, it is clear that inventories are a robust level. Total commercial petroleum inventories increased by 6.0 million barrels last week.

The SNB Leaves Rates Unchanged

The BoE wasn’t the only central bank that made an interest rate decision on Thursday. The Swiss National Bank also left policy on hold, with the Libor target still at -0.75%. At the same time the SNB stressed again that the CHF remains significantly overvalued and that it remains ready to intervene on forex markets as necessary in order to make Swiss franc investments less attractive and thereby ease upward pressure on the currency.

The SNB also repeated again that the CHF remains significantly overvalued, so more or less clandestine intervention is likely to remain the order of the day to keep the currency under control. The central bank highlighted that Brexit has caused “considerable uncertainty” and revised down its growth forecasts for both the U.K. and the Eurozone. For Switzerland it predicts growth of around 1.5% this year, compared to 1-1.5% previously, so an upward revision of the midpoint forecast after the better than expected growth numbers. The central bank said the recovery should reach the labor market, but said there are still risks to the world economy.