The UK Central Bank, the Bank of England kept its key base rate unchanged today in its meeting. According to the central bank, the inflation target 2 % remains also the same. The bank also commented that the outlook for the global growth has weakened due to the US China trade talks since their earlier meeting.
– In the event of a no-deal Brexit, the exchange rate would probably fall, CPI inflation rise and GDP growth slow. The Committee’s interest rate decisions would need to balance the upward pressure on inflation, from the likely fall in sterling and any reduction in supply capacity, with the downward pressure from any reduction in demand. In this eventuality, the monetary policy response would not be automatic and could be in either direction, the bank said in its release.
Yesterday the US Federal Reserve cut the fed funds rates to be 1,75% to 2 %. The Fed also has been active in the money markets adding the liquidity three times during this week.
In Japan the Bank of Japan also kept the rates unchanged in its meeting today on Thursday. On the other hand the Hong Kong Monetary Authorities said that they have lowered the key rate accordingly to the Fed decision, to 2,25 % from 2,5%.
The German 10-year government bond yield was -0,51 %, the UK Gilt´s 0,63% and the US´s 10 year Treasury 1,77%. In France the 10 year bond was yielding -0,22%.
Euro was trading up 0,12 % at 1,10 dollars. Sterling was also up, 0,02 % to 1,247 dollars.
The stock markets surged in Europe today. The Dax-index closed up 6,34 % to 12 457 points, the CAC 40-index increased 5,35 % to 5659 points points in France and the FTSE 100-index closed up 2,32 % to 7356 points in London.
The banking sector were higher in Europe due to the European Central Banks decision to lower the long-term funding (TLTRO III) for lenders. It became effective today. The ECB also announced on the 12th September meeting that the maturity of the refinancing operations will be extended to three years.