Closing post
The Bank of England has opened the door to a December interest rate cut after signalling inflation has peaked as it kept borrowing costs unchanged before Rachel Reeves’s make-or-break budget.
With less than three weeks before the chancellor’s tax and spending statement, the Bank’s monetary policy committee (MPC) voted by a narrow five-four majority to keep borrowing costs unchanged for a second consecutive meeting.
However, City economists said the knife-edge decision and the Bank’s latest predictions for a fall in inflation from the current rate of 3.8% would pave the way for Threadneedle Street to cut rates after the budget.
Holding the casting vote, Andrew Bailey, the Bank’s governor, said he wanted to “wait and see” whether inflationary pressures would continue to fade and if Reeves’s budget would have an impact.
“We held interest rates at 4% today. We still think rates are on a gradual path downwards, but we need to be sure that inflation is on track to return to our 2% target before we cut them again,” he said.
Investors were encouraged that the Bank predicted inflation has peaked, which may pave the way for rate cuts soon – depending on the economic impact of the budget…
Another bout of selling is hitting the financial markets.
The S&P 500 index of US-listed shares is now down 1%, with the Nasdaq index down 1.6%.
The Dow Jones industrial average is down 0.7%, led by Salesforce.com (-6.8%) and Amazon.com (-2.5%).
Stocks wobbled earlier this week amid worries that a boom in valuations of artificial intelligence (AI) companies could be rapidly cooling.
