UK Salary Growth Puts BoE Rate Cut Plans In Question
A report coming from the UK’s Office for National Statistics (ONS) showed that average salaries, both including and excluding bonuses, rose by 5.2% per year in the three months to October. Analysts at ONS noted that “after slowing steadily for over a year, growth in pay excluding bonuses increased slightly in the latest period, driven by stronger growth in private sector pay.” The report’s release found the British pound strengthening against the US dollar on Tuesday morning as analysts adjusted their BoE rate cut expectations.
Investors are bracing for interest rate decisions from major central banks, including the Bank of England (BoE) and the US Federal Reserve (Fed) due later this week.
Bitcoin rose above $107,000 on Monday on the back of Donald Trump’s comments regarding plans to create a US bitcoin strategic reserve similar to its strategic oil reserve.
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UK CPI November 2024 Report
On Wednesday morning, the Office for National Statistics (ONS) will publish the UK’s CPI inflation report for the month of November. Economists suggest that the UK’s CPI could come in at 2.6% on an annualised basis while they expect a 0.1% figure on a month-to-month basis. The services inflation figure is expected to draw attention as it has hovered around 5% in the last few months, pushing the BoE’s policymakers to keep rates on hold.
The report will be significant as the Bank of England (BoE) prepares for its “Super Thursday” monetary policy meeting. Market analysts suggest that the UK’s central bank will not alter its borrowing costs and forecast three 25 basis points cuts in 2025.
Lagarde: ECB Close To Achieving Target
The ECB’s head Christine Lagarde said on Monday that the central bank is close to achieving its inflation target. The French politician and banker noted that “the past bias of keeping rates sufficiently restrictive is no longer warranted.” Commenting on the services' inflation figures, Lagarde added that they have dropped in the last few months.
While the ECB waits for the updates regarding Donald Trump’s tariffs, Christine Lagarde suggested that the eurozone’s economic growth would likely get hit by US protectionist measures. Market analysts forecast a new interest rate cut by the ECB next January as the euro bloc’s economy struggles with the main culprits being Germany and France.
Reuters: China To Raise Budget Deficit In 2025
A Reuters report published today suggested that Chinese authorities are ready to raise the country’s budget deficit to 4% in 2025. The move would aim to boost economic growth as the Chinese economy has been struggling in the last year, trying to reach pre-pandemic expansion levels.
According to Reuters the deficit’s increase of 1% would be equal to $179.4 billion in spending capability. The media outlet’s sources noted that the Chinese authorities would like to implement a more proactive fiscal policy while Reuters reporters added that “more stimulus will be funded through issuing off-budget special bonds.”
It should be noted that the economic growth target for 2025 remains set at 5%. Some economists have suggested that this target should be set lower for next year as the new US president Donald Trump is in favour of imposing tariffs on Chinese imported products.
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