FTSE Down, Seeks Footing After BoE Holds Rates Steady
The BoE voted to keep rates steady, cautioning investors about a delay in policy easing. PM Starmer promises to cut red tape.
- BoE Votes 8 to 1 to keep rates on hold
- Governor Baily cautions about uncertainty
- PM Starmer promises cuts in bureaucracy
The FTSE is down 0.35% this morning, recovering from lower levels earlier on in the session. Investors got exactly what they didn’t want from the post MPC meeting communication.
BoE Set to Delay Interest rate Cuts
The MPC (monetary Policy Committee) voted 8 to 1 in favor of maintaining current central bank interest rates. The only vote in favor of a 0.25% cut coming from the external member Dhingra.
The BoE Governor Baily told journalist that there was increased uncertainty due mostly to the trade tariff set to come into effect in April.
Remarking that the central bank will move cautiously in further rate cuts, with the awareness that they must see evidence of a reduction in price pressures.
The MPC stated “there was no presumption that monetary policy was on a pre-set path over the next few meetings”
The MPC said “there was no presumption that monetary policy was on a pre-set path over the next few meetings”
The financial markets now see a 50% chance of 44 basis point cuts for 2025, down from 50 basis points earlier in the day.
FTSE Live Chart
Reduction in Red Tape, PM’s Promise
Kier Stramer promised to cut back on red tape and bureaucracy to spur economic growth. In his own words “hack back the thicket of red tape” to allow entrepreneurship to succeed.
However, the finance minister, Reeves, has set increased employer taxes which are likely going to burden growth.
The minister is going to hold a conference on March 26, to give an update on her fiscal policy. The chancellor wants to balance the budget deficit, day to day spending, by 2029/2030.
There seems to be some contradiction, as in other speeches the prime minister has also mentioned the need for extra defense spending.
While the economy stagnates and price pressure remains high, it seems likely the BoE will delay for longer any further interest rate cuts. Cutting red tap may a bit too little and too late to keep the rally alive for the FTSE.
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