FTSE Rattled by Changing Outlook for Interest Rates – Weaker Retail Sales

The BoE kept interest rates on hold, as widely expected, but gave a more hawkish outlook for future cuts.

ftse continues to decline on weak data and BoE

  • BoE votes 6 – 3 to keep rates steady
  • Bailey says situation will be reassessed in February
  • Retail Sales increase slower than forecasts – Auto manufacturing slumps

The FTSE continued to decline this morning, down 0.81%, after yesterday’s MPC meeting and weak economic data today. The market is facing a changing stance from central banks on the pace of interest rate cuts.

And the UK is also seeing economic data slowly eroding as inflation remains higher than the BoE target.

BoE Cautious on Policy Guidance

The central bank saw 3 of its 9 members vote for a rate cut at yesterday’s MPC meeting. Bringing the timing of the next cut closer.

However, the governor Bailey of the BoE stated that he saw the market as correctly pricing a possible move at the next meeting in February.

FTSE Live Chart

FTSE

 

“You can see that in immediate market pricing. The market say, well they might cut in February, they might not. That’s a pretty reasonable starting point,” he said to reporters.

Basically, the chief of the BoE is not giving any clear path on the timing for interest rate cuts. He’s concerned about the level of uncertainty going forward.

“I think the path is downward, but I really would caution that at this stage, with the amount of uncertainty, we can’t tell you by how much or when particular moves are going to take place,” He added.

Retail Sales and Auto Manufacturing

The Society of Motor Manufacturers and Traders published production data for the sector today. Figures for November showed that the industry produced 64,216 vehicles, a decline of over 30% compared to 2023.

The organization stated that the decline was due to extensive changes many plants are undergoing in the transition to new technologies. The auto industry is under pressure as it faces high costs to meet electric vehicle mandates.

Retail Sales rose by 0.2% MoM, when analysts had expected a rise of 0.5%. The smaller increase may signal weakness in the economy and consumer confidence. Yet this data was the first rise since August, but economists see the contracting trend hasn’t been bucked.

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ABOUT THE AUTHOR See More
Gino Bruno D'Alessio
Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.
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