Closing post
Time to recap.
Stocks continue to soar in London on hopes that UK interest rates have now peaked.
The FTSE 100 index is up 1.5%, while the smaller FTSE 250 has surged by 3%, despite the Bank of England insisting that monetary policy is likely to need to be restrictive for an extended period of time.
Government bonds have also rallied, a sign that investors don’t expect borrowing costs to rise higher.
The BoE’s warning came as it left UK interest rates on hold at their current level of 5.25%.
It warned that the economy will be on the brink of recession next year, with the economy expected to flatline for the next four quarters if interest rates follow the path expected by financial markets.
During a press conference, governor Andrew Bailey declined to say whether the pain being suffered by households was a price worth paying.
But he pledged to keep monetary policy restrictive for long enough to “squeeze inflation” out of the system, saying:
“Monetary policy is currently restrictive in the sense that if we maintain this stance for long enough, we will squeeze inflation out of the system and that’s what we will do.”
Bailey also predicted that inflation will fall below 5% in October, thanks to lower energy bills…
...while appearing unamused that his predecessor, Mark Carney, had endorsed Labour shadow chancellor Rache Reeves last month.
And here’s the rest of today’s news:
Updated
Here’s a video clip of Bank of England governor Andrew Bailey explaining today’s interest rate decision:
Governor Andrew Bailey explains today’s interest rate decision. pic.twitter.com/d86FXza0la
— Bank of England (@bankofengland) November 2, 2023
