For major central banks, inflation fighting credentials appear to trump financial market volatility. As such, it was no surprise the Bank of England followed in the footsteps of the ECB and the Federal Reserve and raised its interest rate.

As expected, the bank’s Monetary Policy Committee elected to increase its main lending rate by 25 basis points to 4.25%. However, as has been the case over the past year or so, the decision wasn’t unanimous, with both Swati Dhingra and Silvana Tenreyro preferring to keep rates unchanged. It also repeated guidance.

Consensus was for a hike, but a number of commentators had hedged their bets viewing the recent market disruption as reason enough for the policymakers to stop short of the expected target level.

Nomura’s George Buckley said, “Markets had been pricing in less than 10bp for this week’s meeting around the middle of last week, but yesterday’s surprisingly strong February CPI print was a game-changer and immediately ahead of today’s meeting around 22bp of the 25bp hike was priced.” (LiveSquawk - Continue Reading)

UK retail sales are set for a second consecutive monthly gain in February albeit it at a slower pace than in the previous month.  

The latest investor poll forecasts headline sales to rise 0.2% on the month, slowing from January’s 0.5%. Ex-auto fuel sales are expected to grow 0.2% on the month following a 0.4% increase in January.  

Consumer spending is predicted to remain in the doldrums as the rising cost of living drags down real disposable income, which in turn is predicted to drop sales growth 4.7% on the year after January’s 5.1% decline. 

There has been an improvement in consumer confidence readings over the first two months of the year, rebounding from record low readings at the end of 2022.   

“Renewed optimism in the survey data points to some marginal increase in household spending,” Deutsche Bank wrote.  “BRC data, in particular, noted some lift in both food and non-food sales. Kantar data too showed some firming signs in food sales with take-home grocery sales increasing by 8.8% during February. Data from the CBI also showed an uplift, turning positive (in the year to February). Springboard footfall data also showed a near 10% m/m rise in traffic.”

 (LiveSquawk - Continue Reading)

The Swiss central bank has signalled that all is well in the Alpine country by raising interest rates even though just days ago it promised to fund troubled local lender Credit Suisse before helping force it to merge with domestic bank UBS.

The Swiss National Bank said Thursday that it will increase its benchmark policy rate by 50 basis points to 1.5%, a move widely expected by observers. “It cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term,” the bank said in a statement.

Capital Economics wrote, “This morning’s 50bp interest rate hike by the SNB, to 1.50%, was in-line with expectations and shows that, like the ECB and Fed, Swiss policymakers have not been distracted from their inflation-fighting task by problems in the banking sector.” (LiveSquawk - Continue Reading)

Bank of America and UBS trimmed their terminal rate expectations on Thursday after the U.S. Federal Reserve hinted that it might pause its rate-hike campaign due to the turmoil in the banking sector.

The Fed's benchmark rate stood in the range of 4.75-5% following a quarter percentage point hike on Wednesday.

While the Fed's move was largely priced in, a minority of market participants had flagged the possibility of a pause in hikes following the collapse of two mid-sized U.S. lenders as well as a Swiss-backed takeover of troubled global bank Credit Suisse.

BofA analysts said the consequent unexpected tightening in bank lending standards could substitute for further hikes.

Both BofA and UBS no longer expect an interest rate hike in June and see the Fed funds rate peaking in May at 5-5.25% from 5.25-5.5%. (Reuters - Continue Reading)