Another day, another rate cut?
- The first Bank of England meeting since the EU vote – though remember that the Bank is already easing policy (regulatory policy has been eased, and that is one of the trio of tools central banks have at their disposal).
- We think that if the Bank does not cut rates they are likely to signal a cut in rates. Rate cuts are unlikely to boost credit growth (uncertainty precludes that) but they do transfer income from savers to borrowers, which is (broadly) from the older to the younger generation.
- The US Fed's Beige Book of anecdotal evidence was fairly unexciting on the headlines, but did show clear evidence of tighter conditions for skilled and semi-skilled labour. On the issue of the growing inflation threat, input prices were observed to be rising. Producer price data is due today.
- There is little data from the Euro area, although the ECB's head of banking supervision has suggested that the stress tests for Euro banks offer little surprise. This is not a surprise. Bank stress tests never seem to surprise. But banks are still in focus in the Euro area.