Bank of England holds interest rates steady after large Fed rate cut
5% The Held England On At Thursday Rates Of Bank Interest
The Bank of England held interest rates at 5% on Thursday and voted to run down its stock of British government bonds by another £100bn over the coming 12 months, weighing on the government's finances.
On Wednesday, the US Federal Reserve cut interest rates by 0.5 percentage points — a larger-than-expected move that reflected the Fed's confidence inflation pressures were cooling.
The move by the US regulator raised bets on further policy easing at the ECB in October, but this is still not the most likely outcome given different economic realities.
The ECB has already cut interest rates in June and earlier this month, and many at the bank have hinted at steady, quarterly rate cuts ahead to make sure inflation is defeated on a durable basis.
While the Fed's apparent rush lends some support to arguments the ECB is falling behind the curve given rising recession risks, the fundamental economics have not changed overnight, so policy hawks on the Governing Council can make an argument for waiting until December.
"That the ECB needs to cut in October because of what the Fed did is a ridiculous argument that wouldn't fly on the Governing Council," Dirk Schumacher, an economist at Natixis, said.
"The only way to argue that is to say that it [the Fed cut] will change eurozone data and that may be the case but we haven't seen it yet."