BoE cuts rates amidst divided vote

BoE cuts bank rate to 5.00% in tight vote

BoE cut the Bank Rate by 25 bps to 5.00% today, in a closely contested 5-4 vote. Governor Andrew Bailey, Deputy Sarah Breeden, new Deputy Clare Lombardelli, known dove Swati Dhingra, and Dave Ramsden voted in favor of the cut. Chief Economist Huw Pill, Megan Greene, Jonathan Haskel, and Catherine Mann voted against the change.

In the accompanying statement, BoE stated it is now “appropriate to reduce slightly the degree of policy restrictiveness.” The central bank noted that the impact of past external shocks “has abated” and there has been “some progress” in moderating inflation risks.

Despite the cut, BoE emphasized that restrictive policy will continue to weigh on economic activity, leading to a looser labor market and reducing inflationary pressures.

Japan confirms JPY5.53T intervention

Japan has confirmed its intervention in the currency market last month following the yen’s drop to a 38-year low against the dollar. This intervention marked a turning point for the yen, which has since embarked on a significant rally, continuing this week after the Bank of Japan’s (BoJ) second interest rate hike this year. BoJ Governor Kazuo Ueda has indicated that further monetary tightening remains a possibility.

The Japanese Ministry of Finance revealed on Wednesday that authorities spent JPY 5.53 trillion (USD 36.8 billion) on market intervention between June 27 and July 29. This amount aligns with market expectations and underscores Japan’s significant efforts to stabilize the yen.

US jobless claims rise to near 12-month high

The number of people claiming unemployment benefits in the US rose by 14,000 to 249,000 in the period ending July 27, nearing a new yearly high and surpassing market expectations of 236,000. This increase, along with other key indicators, signals a continued weakening of the US labor market. The trend bolsters expectations that the Federal Reserve may consider lowering benchmark borrowing costs by September.