MPC signals rate rises are on the way

Currencies Direct July 23rd 2015 - 2 minute read

UK investors will still be poring over the minutes of the Bank of England’s Monetary Policy Committee, which were released yesterday (22 July). The minutes reflect the more hawkish tone adopted by Governor Mark Carney in his recent speeches.

Policymakers have recently started to change their tone on interest rates. Despite inflation being well below the 2% target (and by a wide margin), Mr Carney has been preparing the markets for a rate rise at some point this year. While the minutes show that the decision to keep interest rates unchanged was unanimous, this was mainly because of developments in Greece.

The MPC noted that “for a number of members, the balance of risks to medium-term inflation relative to the 2% target was becoming more skewed to the upside at the current level of Bank Rate.” The committee said that domestic cost growth was recovering, but that there are questions about the sustainability of the recent rise in wage growth and their ability to offset the drag on the Consumer Price Index.

A minor hiccup for Sterling

The UK’s spenders kept a tighter grip on their wallets in June, according to figures released this morning by the Office of National Statistics. Retail spending was a bit lower than was expected, though still higher than at the same point last year – and that may have helped to stop the pound from slipping further than it did against the Greenback this morning.

Third-time lucky? Greece secures another bailout

For those missing news from Greece, there was relief in the Eurozone after the Greek parliament voted by a wide margin to accept the second round of economic reforms demanded by Greece’s creditors, which was seen as a vital step to getting hold of a third bailout. There were also reports that the European Central Bank had increased Greece’s emergency liquidity assistance cap by a further €900 million.

In other news for euro-watchers, France has reported a rise in business confidence over the course of July, which is in line with a slightly better economic environment. Even Spain, which is second only to Greece as the Eurozone’s worst labour market, has released figures this morning that show another slight drop in unemployment. This has raised hopes that Spain’s recent growth is finally beginning to be reflected in its jobs market.

European data out today will focus on Eurozone consumer confidence and UK retail sales.

US home sales hit eight-year high

Across the pond, US existing home sales showed an eight-year high with a rise to 3.2% in June, bringing the number of sales to its highest level in eight years. US initial jobless claims, the Chicago Federal Reserve’s national activity index and the Kansas City Federal Reserve’s manufacturing activity for July are all scheduled for release today (23 July).
 

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