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Coronavirus: Bank of England holds rates but paints gloomy economic picture

The Bank of England has kept interest rates on hold at the record low level of 0.1 per cent but signalled it is prepared to take further action to tackle the effects of coronavirus.

The Bank’s monetary policy committee (MPC) today said it “stands ready to respond further as necessary to guard against an unwarranted tightening in financial conditions, and support the economy”.

Threadneedle Street also gave a gloomy assessment of the economy. The MPC said: “The economic consequences of [coronavirus] are becoming more apparent and a very sharp reduction in activity is likely.”

The Bank slashed interest rates to 0.1 per cent at two emergency meetings over the last two weeks. That is the lowest interest rates have ever been in the Bank’s 325-year history.

The rate cuts were designed to pump liquidity into the economy during the coronavirus outbreak. It is also meant to shore up lending and balance sheets.

The BoE has also ramped up its bond-buying, pledging to purchase £200bn more debt. It said today it will continue with this quantitative easing. The Bank added: “If needed, the MPC can expand asset purchases further.”

On top of this, the Bank has cut so-called capital buffers for banks, giving them more cash to lend. It will also buy companies’ short-term debt.

The Bank of England today decided to maintain current policy for the time being. But it said it is prepared to take further action if needed.

The MPC added that it is looking at “the pass-through to banks and building societies’ lending rates of the recent reductions in bank rate”.

Ensuring the extra liquidity reaches the right firms has been a concern of the Bank. It yesterday sent a letter to banks, along with the government and the City watchdog, telling them to keep lending to businesses to ensure that previously viable companies do not fail due to the crisis.

Risk of ‘longer-term damage to the economy’

The Bank of England today gave a stark assessment of the outlook for the UK economy. However, it warned predictions were currently deeply uncertain.

“There is a risk of longer-term damage to the economy, especially if there are business failures on a large scale or significant increases in unemployment,” the MPC said.

“There is little evidence as yet to assess the precise magnitude of the economic shock from Covid-19. It is probable that global GDP will fall sharply during the first half of this year. Unemployment is likely to rise rapidly across a range of economies, as suggested by early indicators.”

Paul Dales, chief UK economist at consultancy Capital Economics, said: “After unleashing unprecedented support in two emergency meetings over the past two weeks, the Bank of England took a break today.”

However, he said that if stress starts to show in the UK’s bond markets, “expect the Bank to do more by providing more liquidity and/or increasing its asset purchases”.

He suggested the BoE might follow the US Federal Reserve and “announce open-ended asset purchases”.

By Harry Robertson

Source: City AM

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Bank of England Slashes Interest Rates Again, to Record Low of 0.1%

The Bank of England cut interest rates for the second time in two weeks, to bolster the economy against the coronavirus epidemic.

The latest cut, announced Thursday, took interest rates from 0.25% to 0.1%—the lowest level in the Bank’s 325-year history.

The bank also increased its quantitative easing stimulus package, buying an additional £200 billion of UK government and corporate bonds to pump cash into the economy and keep down the cost of borrowing.

New governor Andrew Bailey, who took over from Mark Carney just Monday, said the measures were designed to calm markets spooked by the mounting death toll from COVID-19, crises in other economies and rumours that London will soon be forced into complete lockdown.

“The obvious increase in the pace and severity of Covid-19, which has built during the week, was something we had to assess and respond to, we can’t wait for the hard economic data before we act,” he said.

Markets reacted optimistically to the news, with the FTSE ending the day up 1.4% and the pound rising against the dollar.

The cut in interest rates and quantitative easing are “highly unlikely to highly unlikely to prevent a sizeable hit to [UK] GDP this year,” analysts at Japanese investment bank Nomura said. But they added, “there can be no question that the monetary and fiscal authorities are throwing everything they can at this problem to support firms and households, cushion demand as much as is reasonably possible, and to reduce the long-term hit to supply.”

However, there will be questions about what further action the Bank of England can take, after Bailey reiterated his reluctance to use zero or negative interest rates.

Bailey said the Bank was considering further monetary boosts it could make. “We are not done. The Bank of England will do what the public needs in the days and weeks ahead.”

As interest rates plunged, some lenders moved quickly to withdraw tracker mortgages from the market.

Henry Jordan, Mortgage Director at Nationwide, said: “With a second cut in interest rates in just over a week, bringing Bank Rate down to an unprecedented 0.1%, we have taken the decision to temporarily withdraw all of the society’s residential tracker mortgages from sale.”

Other lenders, including Barclays, HSBC and Santander, said they would reduce their tracker and variable rate mortgages in line with the new Base Rate.

Among HSBC’s tracker mortgages is a two-year deal which charges just 0.64% above the Bank of England base rate. Now pegged at 0.74%, the deal is believed to be the lowest interest rate ever offered for new mortgages. It’s available to buyers with a 40% deposit, on properties worth up to £5 million—but buyers will need to act quickly. Brokers expect it too will be withdrawn from the market by next week.

Broker Aaron Strutt of Trinity Financial said the recent cuts had demonstrated the value of tracker mortgages. “About 95% of mortgages are on a fixed-rate basis, but if you’d taken out a tracker a couple of months ago your rate would have effectively halved.”

Source: Money Expert

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Bank of England could lower rates further to shield against coronavirus hit

The Bank of England is expected to further cut interest rates and restart quantitative easing to ease the impact of coronavirus on the economy, as former Financial Conduct Authority (FCA) chief Andrew Bailey replaces Mark Carney as governor.

Bailey starts his new job today and is now tasked with steadying the economy against a shock from the outbreak.

One of his first moves could be to cut interest rates as low as 0.1 per cent in the coming weeks, economic experts have predicted.

The Bank of England last week cut interest rates to 0.25 per cent from 0.75 per cent.

And further measures aimed to shore up banks and the economy were yesterday announced by the Bank of England, in a coordinated move with the Canadian, European, US, Japanese and Swiss central banks.

Monetary policymakers have essentially cut the cost and increased the volume of loans it can provide to banks in US dollars, as the US Federal Reserve cut US interest rates over the weekend.

Paul Dales, chief UK economist at Capital Economics, said: “The coordinated action to boost liquidity for banks announced late last night by the Bank of England is designed to prevent the current coronavirus health and economic crisis from spiralling into a full blown financial crisis.

“The idea is that this will nip in the bud last week’s signs that banks are becoming less willing to lend to each other in money markets, which is what caused major problems during the financial crisis.

“We know that a big economic hit is coming, but can only speculate about its size and duration. For what it’s worth, we think a short-term hit to GDP of around 2.5 per cent is possible. While we think (hope) that a financial crisis, which would deepen and lengthen that hit, will be avoided, we do think the Bank of England will have to do more by cutting interest rates by a further 15bps to 0.10 per cent and restarting quantitative easing.”

Samuel Tombs, chief UK economist at Panetheon Macroeconmics, agreed the Bank of England is likely to announce new stimulus measures.

He said: “The Monetary Policy Committee (MPC) might be worried that if they overcook stimulus now and add to the downward pressure on sterling, they will only make life more difficult next year.

“But no one can be confident at this stage that the temporary shock from the coronavirus will not evolve into a self-perpetuating downward spiral in demand, reinforced by falling asset prices and tightening credit conditions.

“The near-term bout of low inflation also might have lingering counterproductive effects on inflation expectations and wage growth, if confidence is not shored up soon.

“So despite the medium-term outlook for inflation, we expect the MPC to cut Bank Rate to its effective floor of 0.10 per cent, from 0.25 per cent, at its scheduled meeting on March 26, and then to restart its QE programme at its meeting on May 7.”

Written by: Lana Clements

Source: Your Money

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Bank of England Slashes Interest Rates to Bolster Economy During Pandemic

The Bank of England has announced an emergency cut to interest rates in an effort to limit the economic impact of the coronavirus pandemic.

In its first emergency meeting since the 2008 financial crisis, the monetary policy committee voted unanimously on Tuesday to slash the base rate from 0.75% to 0.25%.

The Bank said the cut was in response to the “economic shock” of the COVID-19 outbreak and would “help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance.”

Mark Carney, outgoing governor of the Bank, said the economic damage of the virus wasn’t clear yet but suggested the UK economy could shrink in the coming months. Policymakers had already witnessed a “sharp fall in trading conditions,” including in spending on non-essential goods, he said. Other nations are experiencing similar slowdowns and the Chinese economy, the world’s second-largest, is forecast to contract in the first quarter.

However, he said the downturn wouldn’t be as severe as the recession which strangled the UK economy in 2008-09. “There is no reason for it to be as bad as 2008 if we act as we have, and if there is that targeted support.”

The cut was announced on Wednesday, in tandem with Chancellor Rishi Sunak’s budget, which included billions of pounds of measures to support the economy during an extended outbreak of the virus.

The steps were coordinated to have “maximum impact,” Carney said.

The cut takes interest rates back to their lowest level in the Bank’s 325-year-history. Rates were previously cut to 0.25% in August 2016 and subsequently raised in increments in November 2017 and August 2018.

The cut will reduce savers’ yields but benefit some homeowners and those looking to remortgage or purchase a new property. The approximately 10% of homeowners with tracker mortgages will see their monthly repayments fall quickly. Lenders are also expected to respond to their lower borrowing costs—and to tumbling swap rates—by slashing mortgage rates.

When the base rate was last 0.25%, some banks offered two-year fixed-rate mortgages for less than 1%, although borrowers needed a large deposit to qualify. Currently, the best two-year fixes are from NatWest (1.19%) and Barclays (1.21%) but better offers will surely follow.

Mark Harris, chief executive of the mortgage broker SPF Private Clients, said: “This is a bold and decisive move from the Bank of England. Swap rates have tumbled in recent days and both the reduction in base rate, plus lower swap rates, will lead to even cheaper mortgage products.”

Consumers can expect already melting savings rates to fall even further and the best deals to be withdrawn from the market. Customers using savings accounts at high-street banks are already reaping historically low interest rates—usually of below 0.5%—leaving banks with little room to trim them further. But while rates on mainstream accounts are unlikely to dip into the negatives, as they have on some accounts in Denmark and Switzerland, they could flatline at 0%.

Source: Money Expert

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Higher interest rates expected under new chancellor

Advisers should expect higher inflation and interest rates as a result of Rishi Sanuk’s appointment as chancellor.

Mr Sanuk was appointed to the lead role in the Treasury yesterday (February 13) after Sajid Javid threw in the towel in a show of defiance against the prime minister’s demands.

It was reported that Boris Johnson had asked the chancellor to fire his advisers in a bid to achieve a closer alignment with Number 10.

As a result industry participants believe the new chancellor will work more closely with Number 10, leading to more government spending, higher inflation and higher rates.

Mohammed Kazmi, portfolio manager for UBP’s Fixed Income team, said: “The market reaction of gilts selling off, a steeper rates curve and a stronger sterling clearly indicate that expectations are increasing for fiscal stimulus announcements to be made at the March Budget.

“The incentive for such spending comes from the results of the general election itself, which saw the Conservatives win in some traditional Labour Party strongholds, who most likely voted Conservative due to their Brexit pledge, however would probably require fiscal spending to be persuaded to vote for the party again.”

Since the news of the new chancellor became public sterling has risen to its highest level against the euro for three months, having gained 1.1 per cent ,and gained 0.7 per cent gain against the dollar.

Josh Mahony, market strategist at IG Group, said the rise in sterling since the announcement of the appointment of Mr Sanuk was the result of the market expecting a higher level of government spending than under his predecessor, which would lead to higher inflation.

As the Bank of England’s job is to target inflation at or near 2 per cent, if higher government spending leads to higher inflation, it is likely the central bank would have to put rates up.

The higher level of government spending may also lead to a higher rate of economic growth, which would boost demand in the economy, and also contribute to higher inflation.

Meanwhile investors sold off UK government bonds, leading to gilt yields rising from 0.61 per cent to 0.65 per cent on the 10-year bond.

David Zahn, head of European Fixed Income at Franklin Templeton, said government bonds have sold off because the market anticipates that inflation will rise, and this will make the income from bonds less attractive.

But Anthony Rayner, multi-asset fund manager at Premier Miton, said the general lack of inflation and growth in the world economy over the past decade means central banks are now more focused on maintaining economic growth and so won’t rush to put interest rates up, even if inflation does rise.

At the most recent meeting of the Bank of England’s monetary policy committee (MPC), the group that sets interest rates, the decision was made to leave rates at 0.75 per cent, as inflation was 1.3 per cent, considerably below the bank’s 2 per cent target.

The level of economic growth was also viewed as being likely to rise in the coming months, as other countries around the world have already cut interest rates, and this would boost the level of growth in the UK, so a rate cut is not needed.

By David Thorpe

Source: FT Adviser

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Interest rates: what a base interest rate cut would mean for mortgage borrowers

Thinking of taking out a mortgage or remortgaging in 2020? With interest rates remaining at record-level lows, what would a potential further interest rate cut spell for homeowners, apart from the promise of ever-lower fixed-rate mortgage deals?

While an interest rate cut is by no means a guarantee, there is a growing assumption that the base rate will be cut further from the current 0.75 per cent on the 31 January. Does that mean that mortgage interest rates will follow suit and fall even more? Yes; however, there’s more to the consequences of this decision that simply lower mortgage rates.

The current low mortgage interest rates are not just down to the low base rate; or rather the low base rate has set off a chain reaction in which lenders are under pressure to offer ever-lower mortgage rates in a bid to secure a dwindling pool of eligible mortgage applicants.

Current mortgage approval rates lag well behind pre-2008 levels, with fewer first-time buyers coming onto the market every year. The fact is that the current crop of potential first-time homeowners simply doesn’t have the large deposits required for the hugely expensive UK properties (the price of property still sits at over seven times the average UK salary). Add to that unusual income patterns, with a growing number of people in self employment, and it is easy to see that the traditional ideal mortgage applicant lenders have favoured are becoming an increasing rarity.

The fact remains that mortgage lenders cannot afford to lose the custom of those people who can afford a mortgage, but some will find themselves in a situation where they struggle to compete for those applicants. A base rate cut will mean that the UK’s top lenders (the big banks) will either slash interest rates on their top mortgage products, or introduce new mortgage packages with attractive perks, such as cashback, or a combination of both. The reason they can do this is because they have the profit margins to accommodate making concessions to the base rate cut.

This won’t be feasible for small to medium-sized lenders, however, who simply can’t survive on rock-bottom-rate mortgage products. The only avenue for those lenders to keep a sustainable profit margin is by loosening at least some of their lending criteria, or developing more specialist products catering to people with specific circumstances, e.g. self employment, retirement, or buy to let. Those three areas in particular are likely to see an increase of tailored products with better LTVs (loan-to-interest ratios), or more options for repayment strategies on interest-only mortgages.

This is not to say that we will see anything like the loose approach to mortgage lending criteria seen prior to the financial crisis of 2008; the 100 per cent mortgage, for one, is unlikely to make a return. Apart from everything else, all changes will still need to comply with FCA (Financial Conduct Authority) lending regulations. What we are are likely to see in 2020, however, is lenders looking for ways to attract mortgage applicants who are solid, but whose financial profile would previously have categorised their application as non-straightforward.

BY ANNA COTTRELL

Source: Real Homes

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Will the Bank of England cut interest rates this month?

This month’s Bank of England monetary policy meeting is shaping up to be a much more significant one than investors had anticipated.

Following a string of underwhelming macroeconomic data releases and some thoroughly dovish comments from a handful of Bank of England members, currency traders are now bracing themselves for the possibility of a rate cut as soon as the 30th January MPC meeting. This will be governor Mark Carney’s final meeting at the helm of the central bank, and the Canadian is set to be replaced by Chief Executive of the Financial Conduct Authority, Andrew Bailey on 17th March.

The soon to be former governor Carney gave the first real hint that lower rates could be on the horizon at the beginning of the year. Speaking during an event on inflation targeting, Carney stated that there would be a ‘relatively prompt response’ from the bank should weakness in the UK economy persist into 2020. Fellow policymaker Silvana Tenreyro struck a similar tone a few days later, claiming that UK growth was likely to undershoot the bank’s November projections and that she would support a rate cut should the economy continue to slow. Gertjan Vlieghe, who joined the rate-setting board in 2015, was even more forthright in his view, saying that he would vote for a rate cut this month, barring an ‘imminent and significant’ turnaround in UK growth data.

The dovish shift in the committee has come off the back of serially weak UK macroeconomic data since the most recent meeting on 19th December. Of the fifteen data releases that we consider most meaningful since then, nine have surprised to the downside, notably inflation, retail sales and the November growth number. Consumer price growth in the UK is now well short of the BoE’s 2% target. The main headline rate of inflation came in at a three-year low 1.3% year-on-year in December, while the core measure also nosedived to its lowest level since October 2016 (Figure 1).

Figure 1: UK Inflation Rate (2013 – 2019)

Source: Refinitiv Datastream Date: 23/01/2020Retail sales massively undershot expectations last month with 2020, on the whole, the worst year for consumer spending in the UK in twenty-five years according to the British Retail Consortium (BRC). Of even greater cause for concern for policymakers will be the rotten November GDP growth number, which showed that the UK economy contracted by 0.3% month-on-month. While undoubtedly disappointing, it is worth noting that activity in November was very likely to have been dragged lower by the intense political uncertainty surrounding the general election and Brexit – uncertainty that has, of course, since receded.

Figure 2: UK Macroeconomic Data (since December BoE meeting)

That being said, we did receive a much better-than-expected set of business activity PMI data out on Friday that has somewhat cooled expectations for a rate cut. The crucial services index, which accounts for around 80% of overall UK GDP, leapt to a sixteen-month high 52.9 in January, a sharp rebound from the December number. While the manufacturing index remained below the level of 50 that denotes contraction, even this moved sharply higher from December’s lows.

The strength of the data is not particularly surprising, given that it covered the first full month since Boris Johnson’s emphatic election victory on 12th December, which effectively removed the entirety of the short-term ‘no deal’ Brexit uncertainty. We had said prior to the data that we thought the key to whether or not the Bank of England cuts interest rates next week could depend on the strength of the January PMI figures. Now that the data has been released, we think that the MPC will have enough justification to refrain from cutting rates on Thursday, although it is likely to be a close call.

At the December meeting, members Saunders and Haskel both dissented in support of an immediate cut, with the vote split 7-2 in favour of no change. Even following Friday’s strong PMI numbers, we think that there is a decent chance that Vlieghe and Tenreyro follow suit. On the other end of the spectrum, hawks Ramsden and Haldane are very unlikely to vote for a cut this time around, particularly given their recent arguments regarding the need for a more restrictive policy. Jon Cunliffe has recently warned that prolonged easing may risk financial instability. Ben Broadbent has also appeared to place a greater onus on UK labour data, which has actually remained pretty resilient of late. Governor Mark Carney himself appears to be the most on the fence, although we think he’s now more likely than not to side with the hawks at the January meeting.

Figure 3: Bank of England Hawk-Dove Scale

Source:Ebury
Date:23/01/2020In the event of a cut, which we believe would be a ‘one and done’, we actually think that the reaction in the FX market could be relatively mild. This cut, we believe, would be of a similar ‘insurance’ nature to that conducted by the Federal Reserve in the US and certainly not part of a sustained easing cycle. Currency traders also appear to be taking the prospect of lower rates in their stride, with optimism surrounding Brexit offsetting much of the rate cut concerns. During the time in which market pricing for a January cut has risen from effectively zero to more than 50% (07/01-23/01), the GBP/USD cross has actually emerged more-or-less unchanged. So while we would expect a sell-off in the pound in the event of a cut, the magnitude of the move is, in our view, likely to be contained.

Should policymakers again vote in favour of stable rates, our base case scenario, we think a move higher in sterling would ensue given the relatively high market pricing for a cut. With UK economic data expected to improve in the coming months, January may prove to be the last opportunity the bank has to deliver its ‘insurance cut’ before domestic macroeconomic fundamentals simply do not warrant lower rates.

Written by Matthew Ryan

Source: Ebury

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Bank of England policymaker maintains interest rate cut view

Bank of England (BoE) policymaker Michael Saunders has said he is sticking to his view that interest rates should be cut because of weaknesses in the UK’s labour market and wider economy.

“It probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the two per cent inflation target,” Saunders said in a speech on Wednesday morning.

“With limited monetary policy space, risk management considerations favour a relatively prompt and aggressive response to downside risks at present.”

Saunders was one of two of the BoE’s monetary policy committee’s (MPC) nine members who voted to cut interest rates late last year.

Since then, several other MPC members — including outgoing BoE governor Mark Carney — have suggested a rate cut may be necessary.

Saunders said that while some recent surveys had suggested Britain’s economy had improved, while others had worsened and remained sluggish.

“But, taken as a whole … business surveys are generally soft and consistent with little or no growth in the economy,” he said.

“My own view is that, even if the economy improves slightly from the recent pace, risks for the next year or two are on the side of a more protracted period of sluggish growth than the MPR (Monetary Policy Report) forecast,” Saunders added.

Sterling was 0.2 per cent down against the dollar in morning trading on Wednesday.

By Anna Menin

Source: City AM

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Carney says BoE could cut interest rates if weakness persists

Bank of England Governor Mark Carney said on Thursday that the central bank could cut interest rates if it looks like weakness in the economy will persist.

His comments sent sterling to a near two-week low against the U.S. dollar as he outlined a debate on the Monetary Policy Committee about whether interest rates needed to be cut now.

Last month and in November, two of the nine policymakers on the BoE’s interest rate-setting committee voted to cut interest rates to 0.5% from 0.75%, though Carney himself backed keeping rates on hold.

Britain’s economy grew at its joint-weakest annual rate since 2012 late last year, and many indicators of the economy remain downbeat despite signs of optimism among businesses and consumers following Prime Minister Boris Johnson’s landslide election win last month.

While Carney also described reasons for optimism, investors honed in on the comments about a possible rate cut, which he linked directly to the current economic outlook — whereas previously he talked about cuts more as a contingency.

“With the relatively limited space to cut Bank Rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response,” Carney said in a speech at a BoE event on inflation targeting.

Similar language was used in the most recent MPC minutes by Michael Saunders and Jonathan Haskel, who both voted for a rate cut.

Combining possible interest rate cuts and the prospect of more asset purchases, Carney said the BoE’s current armoury was the equivalent of cutting Bank Rate by 2.5 percentage points.

Money markets now price in a roughly 14% chance of a rate cut at the BoE’s Jan. 30 meeting, Carney’s last before he hands over the reins to Financial Conduct Authority chief executive Andrew Bailey, who takes over on March 16.

Markets price in a roughly 50% chance of a rate cut by the middle of the year.

“While this shouldn’t come as a huge surprise given that there has been a couple of MPC dissenters calling for lower rates at the past two policy meetings, it is the strongest hint yet for a rate cut in the not too distant future,” currency strategist David Cheetham of brokerage XTB said.

On asset purchases, Carney said there was room to “at least double” the BoE’s 60 billion pound stimulus package of August 2016, a sum that will increase further as more government bonds are issued over time.

Carney also gave reasons why the BoE might not cut interest rates, citing “tentative” signs that global growth was stabilising and ongoing tightness in Britain’s labour market.

He also said there were early indicators that there had been some reduction in business uncertainty since Johnson’s sweeping Dec. 12 election win.

The rest of his speech focused on possible changes to the BoE’s inflation targeting framework, which he said had served Britain well.

Carney said raising the inflation target, as advocated by some economists as a way to spur growth and escape from years of low interest rates, worked better in theory than in practice.

He also pushed back against those who think the BoE should use its quantitative easing stimulus to directly fund infrastructure or environmental spending.

“In my view, these should be resisted,” Carney said. “While carefully circumscribed independence is highly effective in delivering price and financial stability, it cannot deliver lasting prosperity and it cannot address broader societal challenges.”

Reporting by Andy Bruce

Source: UK Reuters

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Interest rates unlikely to rise in 2020, says ECB policymaker Robert Holzmann

A European Central Bank policymaker has said it is unlikely interest rates will be lifted back into positive territory next year.

Robert Holzmann cited Brexit as being likely to cause renewed concern toward the end of 2020.

The governing council voted to maintain the deposit rate at the historic low of -0.5 per cent in line with market expectations in President Christine Lagarde’s first monetary policy meeting in Frankfurt earlier this month.

“I do not expect a turnaround to a positive interest rate environment next year,” Holzmann said in a statement on Friday.

The head of Austria’s central bank said concern would grow next December toward the end of the UK’s transition period for leaving the European Union.

The UK is currently on course to leave the EU on 31 January with Boris Johnson saying a transition period up until the end of 2020 was non-negotiable, regardless of whether trade and other deals are agreed.

“There is little time for negotiations on future relations, and the outcome of the negotiations is open,” Holzmann said.

The ECB has reiterated earlier this month that rates will stay at the current level or lower until the inflation outlook is close to but below 0.2 per cent, with underlying inflation consistently convergent with that level.

Its annual forecast for real GDP growth for the euro area was 1.2 per cent in 2019, an upward revision of 0.1 per cent, but down 0.1 per cent for 2020 compared with September’s projections at 1.1 per cent.

The forecast for 2021 and 2022 is currently 1.4 per cent.

By Michael Searles

Source: City AM