- As widely expected, the Bank of England kept interest rates unchanged at the final policy meeting of the year. Three members of the nine member MPC committee voted to cut rates by 25bp with the majority opting to keep the benchmark rate unchanged at 4.75%. Signs of stubborn inflation and stronger than expected wage growth have prompted money markets to factor in fewer rate cuts next year with BoE Governor Andrew Bailey expressing caution. In a statement he said, “we think a gradual approach to interest rates remains high” adding “but with heightened uncertainty in the economy we can’t commit to when or how much we will cut rates in the coming year.” Markets are undecided on a cut at the February meeting with analysts once again monitoring data as it Is released for signs of when the BoE may be able to reduce rates to boost growth. ‘Caution’ appears to be the central bank buzzword as we move into 2025 with both the BoE and Fed set to lower rates gradually throughout the year.
- Data released this morning showed that UK Retail Sales grew more slowly than expected in November as ongoing cost of living pressures weighed on consumer sentiment in the wake of the recent budget. The volume of goods sold in stores and online rose just 0.2% last month, lower than the 0.5% that markets were expecting as clothing store sales dipped sharply with retailers reporting tough trading conditions.
- The US dollar remains well supported with the dollar index rising for a fourth day after the Fed cut rates earlier this week. GBPUSD is currently trading around 1.25 and EURUSD remains below 1.04 as markets await the release of eurozone consumer confidence data later this morning. This afternoon the attention shifts back to the US as we look forward to the release of the PCE report. This is the Fed’s preferred inflation gauge and markets are expecting a small reduction in the print for November.
- This is the final Market Watch of 2024, and we would like to wish all our readers a Merry Christmas and a Happy New Year.
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