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What's going on?

The Bank of England (BoE) said on Thursday that the UK economy mightve dodged a bullet for now, but its still way too early to think about increasing interest rates.

What does this mean?

Higher interest rates would make borrowing money more expensive, which would probably discourage businesses and consumers from spending, which would in turn limit economic growth. The BoE even acknowledged that the economic shrinkage it had forecasted this year probably wont be as bad as it thought, and thats partly down to easy access to cheap money. So its taking the if it aint broke approach, and wont raise rates until the price of goods and services (a.k.a. inflation) begins to pick up.


Of course, the specter of Brexit is still looming large. And seeing as its economic effects are likely to be negative, the Bank has said cutting the countrys interest rates even into negative territory is still an option if need be.

Why should I care?

For markets: Enjoy it while you can…


Survey data out this week showed activity in the UKs services industry which drives the vast majority of the countrys economy dramatically improved last month, and by some estimates even implied the British economy grew by 8%. That mightve been why investors bought up the British pound this week. They probably werent short on willing sellers either: Bank of Americas latest forecast said the BoE will be forced to cut rates later this year in response to a still-weak economy and the threat of a no-deal Brexit.



Zooming out: Je ne regrette rien.


The BoE didnt increase its $26 billion corporate bond-buying program on Thursday, but some climate-focused investors havent forgotten about it. Theyve pointed out that it helps sectors like energy and manufacturing, which are expected to drive temperatures above the Paris Agreements defined levels. And while the BoEs independent from the UK government, some argue their climate goals should be better aligned.

Originally posted as part of the Finimize daily email.

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