BoE And ECB Announce Interest Rates

BoE And ECB Announce Interest Rates


Today is the highlight of the week as both the Bank of England and European Central Bank are scheduled to announce interest rates in which expectations reveal that both of the central banks are going to leave them steady at 0.50 percent and 1.00 percent respectively.

First on our calendars, is industrial production for September in which expectations reveal that will improve to 1.2% from -2.5% while on the year it will ease its decline to -10.3% from -11.2%. Also manufacturing production monthly is to be released with projections showing that it will rise to 1.0% from -1.9%, as for yearly it will enhance to -9.7% from the prior -11.3 percent.

As the production from the manufacturing sector is recovering, this hints that production output is somewhat enhancing as industries are trying their hardest to shake off the worst global recession witnessed since post world war era. The higher production output indicates that demand levels are slightly inclining and this helping industries produce more.

Next on our calendars are retail sales from the euro zone for September where they are forecasted to rise to 0.2% from the previous decline of 0.2% while on the year they are due to enhance to -2.4% from -2.6 percent.

The improvement in retail sales gives us evidence that finally consumers are starting to spend as they are gaining slight confidence about the outlook of the euro zone, since it is believed that consumers mostly spend when they are confident with the nation.

Lately, consumer confidence has been rising and this is what the ECB was anticipating. Also consumers are spending as they are taking advantage of reduced merchandise as lately retailers have been increasing sales as a way to encourage more consumers to enter their stores which would help retailers shore up profits.

Now turning to the major news of the day, the BoE will not only announce their rate decision, yet they will decide if they are going to expand the APF program or not in which already it is expected from the markets that the central bank will add an additional 50 billion pounds to the current amount of 175 billion pounds towards purchasing gilts.

The central bank had to apply quantitative easing methods because even with taking interest rates down to the lowest on record at 0.50% did not support economic growth much, which was why they had to turn to other measures to jolt the United Kingdom out of recession.

The APF program has been proving itself successful as we are noticing improvement in the nation take place yet there are worries that this program on the long run could trigger inflation, while from our point of view that should not be a problem because then the BoE could boost rates to encourage more savings to take place.

The ECB like the BoE are going to leave rates unchanged at 1.00% since currently the central bank is more interested in the unorthodox measures than changing interest rates. While after the announcement of the rate decision, President of the central bank Jean-Claude Trichet will speak giving us an overview of the current economic conditions

The volatility remains in the stock markets as once again after the European session ended Tuesday in the red zone, yesterday they closed in the green territory. The DJ Euro Stoxx 50 gained 50.99 points or 1.88% to 2763.29 points, CAC 40 climbed 86.08 points or 2.40% to 3670.33 points while the DAX surged 90.88 points or 1.70% to 5444.23 points.