Closing summary: Pound gains as Andrew Bailey strikes more cautious tone on rate cuts
The pound has gained ground in recent days as a gap appears to have opened up between the Bank of England and the Federal Reserve, strategists say.
While Fed chair Jerome Powell said “the time has come” for interest rate cuts, Bank of England governor Andrew Bailey appeared to suggest that the pace in the UK will be slower.
That has helped to lift sterling to its highest level in two years against the US dollar on Tuesday, at $1.3246 at its peak. Interest rate cuts tend to make a currency relatively less attractive for investors looking for higher-yielding assets.
Imogen Bachra, head of economics and markets strategy at NatWest Markets, a bank, said that
He adopted the same fairly cautious tone that we heard in the press conference a few weeks ago. The conclusion is that data is softening enough that the MPC appears comfortable to take its foot off the gas, but not especially quickly and probably not as far or as fast as the market is pricing. The speech itself was quite lengthy, and I think the key paragraph was buried somewhere in the middle (emphasis ours):
“In the UK case, the evidence suggests this may have worked insofar as we are seeing a lower level of inflation persistence than we expected a year ago. But, we need to be cautious because the job is not completed – we are not yet back to target on a sustained basis. Policy setting will need to remain restrictive for sufficiently long until the risks to inflation remaining sustainably around the 2% target in the medium term have dissipated further. The course will therefore be a steady one.”
Derek Halpenny, head of research at MUFG, a Japanese investment bank, said:
There was certainly a more cautious tone to the speech from Bailey in contrast to Fed Chair Powell’s speech. But that is of course understandable. There was a far larger energy price shock in Europe than in the US and the problem in Europe was more supply-, less demand-related.
In other business news today:
The Meta boss, Mark Zuckerberg, has said he regrets bowing to what he claims was pressure from the US government to censor posts about Covid on Facebook and Instagram during the pandemic.
The veteran media executive Edgar Bronfman Jr has abandoned a $6bn (£4.5bn) bid for Paramount Global, clearing the path for the conglomerate’s multibillion-dollar merger with the production group Skydance Media.
More than 40 green groups have called on Ed Miliband to scrap plans to pay billions in subsidies to the Drax power plant in North Yorkshire for it to keep burning wood pellets imported from overseas forests.
Arts and crafts chain Hobbycraft has been bought by retail investor Modella Capital from private equity investor Bridgepoint an undisclosed sum. Modella said it will invest in Hobbycraft’s stores.
European airlines’ share prices rose after Ryanair boss Michael O’Leary said the worst-case fare falls (from investors’ perspective rather than consumers) had been avoided.
Retail sales fell for a third month in a row, with businesses scaling back hiring and investment plans, according to data just published by the Confederation of British Industry (CBI).
You can continue to follow our live coverage from around the world:
Unite union criticises Starmer’s ‘bleak vision of Britain’ as Sunak says warning of ‘painful’ budget lays ground for tax rises
Ukraine claims to have captured 100 settlements in Kursk and almost 600 Russian service personnel
In our coverage of the Middle East crisis, the Israeli military says Gaza hostage rescued in complex operation
Trump campaign attacks Harris over lack of interviews as vice-president rolls out housing plan
Thank you for following the business live blog today. Please do join me tomorrow for more of the same. JJ
Soft drinks maker Britvic is on its way to being slurped up by Danish giant Carlsberg after shareholders voted overwhelmingly for the deal.
Britvic, whose brands include J20, Robinsons and R White’s lemonade, accepted a £3.3bn offer in July after rejecting previous takeover offers from Carlsberg on the grounds that they undervalued the company.
On Tuesday the company said that all the motions it had put to shareholders had passed. The vote to sell to Carlsberg was near unanimous:
Number of votes: For: 165,809,035 (99.69%) Against: 515,673 (0.31%)
