Home Business NewsBusiness Bank expected to hold rates, and growth disappoints in October

Bank expected to hold rates, and growth disappoints in October

by LLB Reporter
13th Dec 21 10:52 am

The MPC is meeting next week (announcement16 December). It is expected that Bank Rate will be held at 0.1%.

GDP rose by a less-than-excepted 0.1% (MOM) in October and was still 0.5% below pre-pandemic February 2020. Services grew but production and construction contracted.

The Prime Minister announced further Covid-related restrictions on 8 December, in addition to those announced on 27 November (England).

There was a modest improvement in the trade (goods and services) balance in October.

Markit surveys were fairly firm for November, but note the data were mainly collected before the announcement of the  Covid-related restrictions on 27 November.

Halifax reported that house prices rose by a buoyant 1.0% (MOM) in November to be 8.2% higher YOY. The SMMT reported that new car registrations in November 2021 were just 1.7% higher than lockdown-hit November 2020. They were, moreover, 31.3% below the pre-pandemic five-year average.

 International update:

  • The FOMC is meeting next week (announcement 15 December). Following on from recent hawkish comments from Fed Chair Jerome Powell, it is expected the winding down of the asset purchases programme will be accelerated, though interest rates will be unchanged.
  • The ECB is also meeting next week (announcement 16 December) and is expected to review the future of the pandemic emergency purchase programme (PEPP), whilst interest rates will be unchanged.

Ruth Lea said “Given the weak October GDP figure and the further extension of Covid-related restrictions, it is now very unlikely that the MPC will increase the Bank Rate next week. And this is despite some evidence of intensifying inflationary pressures. Even though the new Covid-related measures are still short of full “lockdown”, they will inevitably curb activity, especially in the hospitality and travel industries.”

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