About CMSForex ServicesTrading SoftwareForex EducationForex ResourcesMy Account
www.cmsfx.com
Free Online Forex Course www.cmsfx.com Forex Web Tools www.cmsfx.com

Interest Rate Announcement
The policy boards of a country's central bank get together every 4-6 weeks, or sometimes every quarter (Switzerland) to decide on the country's base interest rate. The central bank's role is to limit inflation, while also maintaining stable economic growth. To heed of inflation, a central bank will raise rates; and during times of poor economic growth, the bank will work to lowers rates in order to stimulate growth.

Main Indicator: BOE Interest Rate Statement

Most Recent Release

May
8th, 2008
Actual Forecast Previous Revised Form
5.00% 5.00% 5.00% N/A

Provided by: Bank of England
Official Announcement: News Release

The Bank of England kept its benchmark rate at 5%. The Monetary Policy Committee has moved to cut rates 3 times since December, reducing the rate a quarter-point in their last meeting. Though the economy is weakening, inflation pressures remain a concern for the central bank. Expectations are for another quarter-point reduction in the next meeting, as policy makers try to stem a sinking housing market, and slower services and manufacturing activity. Consumers are becoming more and more pessemistic about current conditions. One benefit to weakengin growth is the hope, by policy makers that inflation will cool as well. 

Table of Past Data

8/29/610/411/812/61/102/73/64/105/8
Actual5.75%5.75%5.75%5.75%5.50%5.50%5.25%5.25%5.00%5.00%
Forecast5.75%5.75%5.75%5.75%5.75%5.50%5.25%5.25%5.00%5.00%
Previous5.75%5.75%5.75%5.75%5.75%5.50%5.50%5.25%5.25%5.00%
Revised FromN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A

Secondary Indicator: BOE Meeting Minutes

Most Recent Release

April
23rd, 2008
Actual Forecast Previous Revised Form
7-2 cut 9-0 cut 7-2 hld N/A

Provided by: Bank of England
Official Release: PDF 

The Bank of England policy makers split into 3 camps during the last meeting. David Blanchflower called for a more aggressive 50 basis point cut, while two members, Andrew Sentance and Timothy Besley thought no change was necessary. The other 6 members voted for a 25 basis point gradually paced cut as they were moved by deteriorating condition in global credit markets and the effect that had on investment spending by businesses, mortgage lending by banks and spending by individuals and households. The bank cut rates despite high inflation in the short term.

The minutes show a bank willing to take its time as it lowers rates, which pressured the Pound during today's session. The bank will most likely cut rates by 25 basis points when it meets in June.  

Next Release Date: May 21st 2008, 4:30 EST

Table of Past Data

7/188/159/1910/1711/2112/191/232/203/194/23
Actual6-39-09-08-17-29-08-1 hld7-2 hld7-2 cut
Forecast9-09-07-28-1 hld9-0 cut
Previous5-46-39-09-08-17-29-0 cut8-1 cut7-2 hld
Revised FromN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A

Past Releases

BOE Interest Rate Statement
April
10th, 2008
Actual Forecast Previous Revised Form
5.00% 5.00% 5.25% N/A

Provided by: Bank of England
Official Release: News Release

As expected the Bank of England lowered rates, the third cut since December as higher credit costs and the worst housing slump in 16 years threatened to push the economy into a recession. The policy members acknowledge that they have to balance high inflation, which is pushing a nine-month high with expectations of a prolonged contraction.

From the Release:

"In the Committee’s judgement, the balance of these risks to the inflation outlook in the medium term justifies a cut in Bank Rate this month. Credit conditions have tightened and the availability of credit appears to be worsening. While the recent depreciation in sterling will support net exports, the prospects for output growth abroad have deteriorated. In the United Kingdom, business surveys suggest that growth has begun to moderate and that a margin of spare capacity will emerge during this year. This should help to keep domestic inflationary pressures in check in the medium term.

Against that background, the Committee judged that a reduction in Bank Rate of 0.25 percentage points to 5.0% was necessary to meet the 2% target for CPI inflation in the medium term."

BOE Meeting Minutes
March
19th, 2008
Actual Forecast Previous Revised Form
7-2 hld 8-1 hld 8-1 cut N/A
Provided by: Bank of England

The Bank of England Minutes expressed uncertainty about the length and depth of the slowdown abroad and in domestic demand. There has been some more deterioation in the UK financial environment, but investment has not dropped significantly yet. The manufacturying and services sectors showed resilience, while many timely indicators were mixed. Inflation has eased off, and is expected to return to acceptable levels as commodity prices stabilize.
Although the bank denied that any major financial institutions applied for emergency funding, this does not mean they will not need them in the coming weeks. Credit conditions are worsening.
"Sentiment in international credit and money markets appeared to have deteriorated over the month. Term interbank spreads had risen in the US and UK money markets, probably reflecting heightened concerns about counterparty credit risk.
The bank did not want to have a back to back rate cut because it is still concerned about inflation. However, it will be hard pressed not to lower rates in the next meeting on April 10th by at least 25bps.
BOE Interest Rate Statement
March
6th, 2008
Actual Forecast Previous Revised Form
5.25% 5.25% 5.25% N/A

Provided by: Bank of England

The Bank of England held rates steady at 5.25% after lowering rates 25 basis points in February. The UK economy is facing signs of slowdown, and its housing sector is experiencing weakness as a result of higher credit costs, and falling prices. However, concerns over near-term inflation pressures, and more important, longer-term inflation expectations, were the overriding factors in the Monetary Policy Committee's decision. 

The GBP/USD rose following the news, and regained the $2 mark. It set a new high at $2.0094 as of 11:30 AM EST. Expectations are that the Bank will follow a gradual path in lowering rates, as a combination of higher rates and a slowdown in overall growth will mitigate inflation. As long as the economy doesn't turn down drastically, the Bank will focus on containing inflation expectations over the long term.   

BOE Meeting Minutes
February
20th, 2008
Actual Forecast Previous Revised Form
N/A

Minutes of the Monetary Policy Committee Meeting
Held on 6 & 7 February 2008
Provided by: The Bank of England

The Bank of England Meeting Minutes reveal that David Blanchflower voted for a .50% reduction in the Bank Rate compared to the other 8 board members, that voted for a .25% reduction. The Bank is expecting inflation to rise sharply in the short term.

"CPI inflation, at 2.2% in January, was close to the 2% target. But the Committee expected that higher energy and food prices would raise inflation, possibly quite sharply, in the coming months. Producer input and output prices were already rising rapidly and the decline in the sterling ERI would boost import costs further. The impact of these short-term pressures on CPI inflation was likely to fade later in 2008, so that inflation was likely to fall back towards the target. But measures of inflation expectations had not fallen in line with actual CPI inflation following its peak during 2007. There was a risk that above-target CPI inflation in the near term would affect inflation expectations, and hence have some tendency to persist in the medium term.

Given this outlook for inflation, the Committee noted that some slowing of demand growth, by reducing the pressure on capacity, was likely to be necessary to return inflation to target in the medium term. The Committee needed to balance the risk that a sharp slowing in activity would pull inflation below the target in the medium term against the risk that elevated inflation expectations would keep inflation above target. Changes in Bank Rate could not be expected to smooth out all short-term fluctuations in output growth.

For a majority of Committee members, balancing these key risks required an immediate reduction in Bank Rate of 25 basis points. Interest rates were probably still bearing down on demand, partly because higher market spreads meant that the level of Bank Rate consistent with any given monetary stance was lower than it had been before spreads had widened. The February Inflation Report, and its accompanying projections, would set out in detail the upside and downside risks to the outlook for inflation. The central projection suggested that there was most likely to be some spare capacity in the economy, even if interest rates followed the path implied by market yields. That would therefore help to ensure that inflation returned to the 2% target in the medium term."

BOE Interest Rate Statement
February
7th, 2008
Actual Forecast Previous Revised Form
5.25% 5.25% 5.50% N/A

News Release from the Bank of England

"The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.25%.

The prospects for output growth abroad have deteriorated and the disruption to global financial markets has continued. In the United Kingdom, credit conditions for households and businesses are tightening. Consumer spending growth appears to have eased. Although the substantial fall in the sterling exchange rate is likely to promote re-balancing of total demand, output growth has moderated to around its historical average rate and business surveys suggest that further slowing is in prospect. These developments pose downside risks to the outlook for inflation.

CPI inflation, at 2.1% in December, was close to the 2% target, but higher energy and food prices are expected to raise inflation, possibly quite sharply, in the coming months. And the lower level of sterling will boost import costs. The impact on inflation should begin to fade later in the year, but measures of inflation expectations are currently elevated. These developments pose upside risks to the outlook for inflation further ahead."

 

BOE Meeting Minutes
January
23rd, 2008
Actual Forecast Previous Revised Form
8-1 hld 9-0 cut N/A
Minutes Provided by the Bank of Enlgand (.pdf)

Minutes of the Monetary Policy Committee meeting held on 9 & 10 January 2008.

"There had been a considerable amount of news over the past month that was relevant to the outlook for demand and inflation. At the time of the November Inflation Report, the Committee judged the risks to growth to lie on the downside and the risks to inflation to be balanced. Since then, the data outturns had been broadly in line with the November Inflation Report projections for output and activity, but the downside risks to future demand had increased, reflecting the outlook for UKweighted global demand and credit conditions. However, the upside risks to inflation from supply-side developments had increased in each of the past two months, largely reflecting changes in food and energy prices and the exchange rate."

"For most members, no change in Bank Rate was necessary this month. The short-run inflation outlook had worsened markedly... Reductions in Bank Rate in two successive months might, given the current conjuncture, encourage observers to think that the Committee was focused more on stabilising demand than meeting the inflation target and so shift the yield curve down further. The Committee would be able to use the February forecast round to assess the medium-term outlook for inflation, and the impact on that of both the upside risk to inflation in the short term and the downside risk to demand and activity."
BOE Interest Rate Statement
January
10th, 2008
Actual Forecast Previous Revised Form
5.50% 5.50% 5.50% N/A
The Bank of England left its leading interest rate unchanged at 5.50%. The Monetary Policy Committee will most likely wait till next month before easing rates to help an economy that has been faced with increased signs that it is hitting a rough patch. With credit costs higher, banks have been more reluctant to lend to individuals and businesses. The main outcomes has been a slowdown in the housing sector, which has made consumers more pessimistic and consumer spending to slacken.

The Committee is at the same time worried about inflation which has been propelled by record high oil prices. With their decision to hold rates this month they sided on keeping inflation pressures stifled.
BOE Meeting Minutes
December
19th, 2007
Actual Forecast Previous Revised Form
9-0 7-2 N/A
Minutes for MPC Decision on December 5 and 6.
Release from Bank of England MPC Minutes

The MPC voted unanimously to cut rates, first time since September, 2001. Further deteriorations in financial markets prompted the committee to reduce 25bps to 5.5%. The minutes revealed further pressure to cut rates as output growth had begun to slow, and business activities had declined. Housing prices have also been slipping, and business investments are subdued. Some recent inflation concerns for the coming year were curbed as the projections were "largely driven by temporary cost shocks, whose impact was expected to diminish."
BOE Interest Rate Statement
December
6th, 2007
Actual Forecast Previous Revised Form
5.50% 5.75% 5.75% N/A
Bank Of England Press Release
Minutes are due Dec 19.

The Bank of England lowered rates today by 25 basis points to 5.50%. The UK economy is slowing after strong output growth in the past two years. The economy is slowing as the financial services industry reels from the subprime slump and rising credit costs discourage consumers with record debt. The Bank pointed out that both households and business spending is moderating, and that the credit squeeze poses downside risks to outlook for both output and inflation. Though the bank sees inflation as a problem in the short term, "slower demand growth should ease pressures on supply capacity bringing inflation back to target in the medium terms."
BOE Meeting Minutes
November
21st, 2007
Actual Forecast Previous Revised Form
7-2 7-2 8-1 N/A
For Nov. 7-8th Meeting.

Two members of the Monetary Policy Committee, voted to reduce the countries interest rate. Deputy Governor John Gieve joined David Blanchflower in arguing for one after Bank of England Governor Mervyn King said last week that economic growth is poised to weaken "sharply."

The other members argued that a move on rates now from 5.75% may be misinterpreted, and higher oil and commodities prices may increase inflationary pressure.
BOE Interest Rate Statement
November
8th, 2007
Actual Forecast Previous Revised Form
5.75% 5.75% 5.75% N/A
Despite pressure from shops and businesses to cut rates, the BoE held steady.

Inflation Report came out Wednesday, November 14.
Minutes came out Wednesday, November 21.

GBP/USD Gains: After the announcement, the Pound broke above 2.11.

GBP/USD - Reaches 2.11

Pound Stumbles After Barclay's "Write down": The next day brought quite different news as the Pound lost as a result of Barclay's writing down losses tied to mortgage losses. This started a heavy sell off of carry trade positions, especially the GBP/JPY.

GBP/JPY - 600 Pip Move
BOE Meeting Minutes
October
17th, 2007
Actual Forecast Previous Revised Form
8-1 9-0 9-0 N/A
For October 3-4 Decision to hold rates

Other than David Blanchflower who voted for a 25bps cut, the rest of the committee voted to hold rates. The minutes revealed that the MPC felt that although the markets are fragile, improvements have been seen in money market conditions.

The main reason not to cut rates was a fear that the move will suggest a downside to economic growth. The committee did not want a misinterpretation and decided to hold rates and monitor further developments in the markets. Counter to this argument was that downside risks have already crystallized.
BOE Interest Rate Statement
October
4th, 2007
Actual Forecast Previous Revised Form
5.75% 5.75% 5.75% N/A
The Bank of England held rates steady at 5.75% for the 3th straight meeting, after hiking it 25 basis points in July. Higher credit costs and recent fundamental indicators are showing an economy that is cooling. Whereas 4 months ago, the bank held the view that inflation was a main concern and further tightening might be needed, the next move by the bank will likely be a rate cut.

The Bank of England has felt very directly the affects of higher credit costs on its economy. It was forced to bail out UK’s fifth largest mortgage lender – Northern Rock Plc – last month. After hearing about the problems Northern Rock was facing, the bank’s customers rushed to withdraw their savings, with lines forming outside branches for days.

Forecasts of overall growth for 2008 have been cut in Europe and Switzerland recently, and Manufacturing and Services PMI were particularly weak in September.

The policy committee will wait for a full report on inflation, and further assess the effects on the economy before they move on rates, but a cut next meeting on November 8th is possible.

The EUR/GBP, a very quiet pair, fell sharply 40 pips (in the Pound's favor) after the BoE and ECB announced their interest rate decisions to hold.

EUR/GBP - Post Central Bank Announcements

The last five sessions have seen the pair retreat 100 pips from a high around .70.

EUR/GBP 2 Week View
BOE Meeting Minutes
September
19th, 2007
Actual Forecast Previous Revised Form
9-0 9-0 9-0 N/A
The minutes reveal mixed signals from indicators and outlooks on the economy. For example, manufacturing level has been strong, yet manufacturing investment declined, likely from the uncertainty arising from international financial markets' recent volatility. Employment has seen improvement since early 2007, but has seen some "hiccups" in July and some drop in employment intentions. Inflation has eased, and wage growth is muted.

There was a lot of mention about banks ability to absorb the hit by the illiquidity of Asset Backed Securities (ABS). The BoE believes after some adjustment in the bank's balance sheets, liquidity should be restored and the elevated LIBOR rates should recede.

Among other channels of intermediation, the minutes show a central bank prepared for further turbulence in the financial and credit markets. They held with caution and acknowledged that there is a rise in uncertainty and they will monitor upcoming market developments.
BOE Interest Rate Statement
September
6th, 2007
Actual Forecast Previous Revised Form
5.75% 5.75% 5.75% N/A
The BOE left rates at 5.75%, as widely expected, accompanied with a statement that dealt both with recent troubles in the money markets and the upside risks to inflation. The Bank said, “It is too soon to tell how far the disruption in financial markets will impair the availability of credit to companies and households” but that the bank will closely monitor “the evolution of both credit spreads and the quantities of credit extended.”

Citing CPI moving down to 1.9% in July, below the target level, and “signs of slowing in consumer spending” they project that CPI will remain around or a little below the 2% target. However, the economy’s “solid pace of output growth has been sustain and the margin of spare capacity appears limited.” Meaning, there are still inflationary pressures that can arise, and the Bank will monitor them as “recent indicators of price pressure remain somewhat elevated”.

See Today's Market Highlight to see the GBP/USD and GBP/JPY's reactions to the news.
BOE Meeting Minutes
August
15th, 2007
Actual Forecast Previous Revised Form
9-0 6-3 N/A
for Jul. The board voted unanimously to hold rates at 5.75%. The decision to hold was based on uncertainty of the developments in the financial markets, and less on the inflation concerns the MPC had previously emphasized. Besides the market volatility, there has been slight easing of inflation, noted at 2.4% for June. We know now, July's CPI dropped to 1.9%, back to the bank's target rate. Also, there were some signs of easing in the housing market.
BOE Interest Rate Statement
August
2nd, 2007
Actual Forecast Previous Revised Form
5.75% 5.75% 5.75% N/A
Minutes will be be released August 15th.
BOE Meeting Minutes
July
18th, 2007
Actual Forecast Previous Revised Form
6-3 5-4 N/A
The minutes for the July rate hike revealed a mix of opinions. Today's minutes seem relatively dovish looking ahead to the August decision, citing easing of inflation, and a weak labor market despite strong output. Although growth appears strong and sustainable, some emerging data is causing downside risk concerns for the MPC, although they are not confirmed.

www.cmsfx.com