Bank of England tipped to leave interest rates on hold; Shell profits drop – business live
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Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
These are tricky times for central bankers. Growth is being held back by high interest rates, while inflation is still over target despite falling back from the peaks of the last two years.
So the Bank of England has plenty to ponder, as it prepares to set interest rates at noon today.
The City is confident that the Bank will leave interest rates on hold at their current 16-year high of 5.25%. With inflation at 4% – twice the BoE’s 2% target – policymakers probably won’t feel confident easing policy.
The money markets reckon there’s a 99% chance that the Bank holds rates unchanged today, with a 1% possibility of a shock rise to 5.5%.
The Bank may also cut its forecast for inflation this year, while investors also expect the BoE to signal when rate cuts are likely to start this year.
The Bank of England is likely on Thursday to deliver a brighter outlook for the UK economy, reducing its forecast for inflation this year and potentially opening the way to interest-rate reductions that could boost growth https://t.co/bmoBKJQBuZ
Rates have been held at 5.25% since last August. But the nine members of the Bank’s monetary policy have been split at recent interest votes – with some hawkish members pushing for higher borrowing costs.
April LaRusse, head of investment specialists at Insight Investment, says:
“We don’t expect any change in UK rates tomorrow, but the vote is going to be fascinating. At the last meeting of the Monetary Policy Committee in December three members of the committee voted to increase interest rates to 5.5%.
A lot has changed since then; the US Federal Reserve have pivoted to a more dovish outlook and markets are now pricing in a series of UK interest rate cuts starting in May. With inflation now considerably below the Banks own forecasts we expect a shift in tone – but the Bank is going to face a tricky job to keep market perceptions on a realistic path.”
Last night, America’s Federal Reserve left interest rate on hold, while Fed chair Jerome Powell tried to cool expectations that the Federal Reserve would begin cutting interest rates as soon as March.
Powell insisted a March cut was not the Fed’s “base case”, seen as an indication that the Fed could delay easing monetary policy until May.
That, and jitters about the health of US regional bank New York Community Bancorp, knocked stocks in New York last night. It cut its dividend and posted a surprise loss, renewing fears over the health of similar lenders.
The S&P 500 index of US shares lost 1.6%, while the tech-focused Nasdaq Composite lost 2.2%. Google’s parent company, Alphabet, lost 7% after missing advertising revenue targets in its latest results.
The S&P 500 extended its losses and fell 1.6% today after #Fed Chair Jerome Powell ruled out rate cuts starting as soon as March – a hawkish stance relative to market expectations, in my view. I don’t think this Fed-induced equity pullback will last. More on my take 👇
The UK Labour Party will be wooing business chiefs, and vice versa, today as it holds its largest ever business conference.
Around 400 senior business leaders will gather in London for speeches, panels and roundtables in central London, at an event where tickets sold out in just a few hours.
With a general election due within a year, Labour are expecting business leaders from companies such as Google, Shell, AstraZenaca, Airbus, and Goldman Sachs.
They hope the conference will demonstrate the party’s “commitment to work hand in glove with the business community” and will use it as an opportunity to reveal its business policy plans after two major industry reviews.
No changes are expected to monetary policy today with the main question being around whether our resident hawks decide to vote with the majority for no change and temper their hawkishness. Of the 19 meetings Catherine Mann has voted in she has voted to increase the base rate at 17 of them so a hold will be a rare event for her.
There is also the possibility of a dovish outlier with the potential for Swathi Dhingra voting for a rate cut, prompting a split in the opposite direction to what we saw in December.
Since joining the MPC Dhingra has only voted to raise rates twice in the 11 meetings she has voted in, so if anyone is going to break ranks and starting voting to cut rates it will be her.
Ben Laidler, global markets strategist at eToro, expects the Bank of England to start opening the door to interest rate cuts later this year.
The Bank of England (BoE) has been the most hawkish of major central banks and this has made Sterling one of the best recent currency performers. With UK inflation still double its 2% target, economic growth has been better-than-feared, and the government set for more tax cuts at its March budget.
But enough inflation-fighting progress has been made for the BoE to begin opening the door to lower interest rates starting this summer, with four cuts likely in the second half. This would lag behind the US Fed and Europe’s ECB but be welcome, and borrowers have already started to benefit from the fall in bond yields.
However, Tomasz Wieladek, chief European economist at T. Rowe Price, predicts the Bank will sound hawkish today, and signal to the markets that too many rate cuts are expected:
In December, UK inflation turned out to be stickier than expected, while survey data suggested a rebound in output and employment in the services sector. Mortgage approvals have begun to rise and mortgage rates are now falling, which will allow the mortgage and housing market to recover further over the next 6-12 months.
Economic activity will continue to rebound over the next couple of months as a result of the 2% National Insurance cut, which became effective at the beginning of the year. This will raise demand in the economy, while any additional tax cuts may increase demand further.
Shell chief executive WaelSawan says the group “delivered another quarter of strong performance”.
“As we enter 2024 we are continuing to simplify our organisation with a focus on delivering more value with less emissions.”
Greenpeace activists dressed as Shell board members have held a demonstration outside the energy giant’s headquarter this morning.
They conducted a mock Shell profits party behind a burning sign reading “Your Future”, to highlight the climate damage caused by fossil fuels.
Photograph: Henry Nicholls/AFP/Getty Images
For safety reasons, no alcohol was consumed, says Greenpeace. The ‘champagne’ featured was 0% ABV. Photograph: Greenpeace/Getty Images
Maja Darlington, Campaigner at GreenpeaceUK, said:
“Fires are raging across Colombia, Britain has been wracked by floods, 2023 smashed global temperature records, but Shell is posting yet more obscene profits from climate-wrecking fossil fuels. While customers struggle with the cost-of-living crisis, Shell shovels over $20 billion to shareholders and drills for yet more oil and gas, climate disasters are multiplying and hitting hardest those who have done the least to cause the crisis.
“It’s time to end the fossil fuel party. It would take the average British worker over 640,000 years to earn as much as Shell did last year. Our government must make oil companies like Shell stop drilling and start using their immense wealth to pay for the damage they are causing, before all our futures go up in flames.”
Shell has beaten City profit expectations, by posting earnings of $28.25bn for last year.
Analysts had expected Shell’s full-year 2023 net profit to come in at around $27.5bn, reports CNBC.
Profits at oil giant Shell have dropped by almost a third, but that hasn’t stopped it announcing another share buyback scheme and lifting its dividend.
The drop in profits is due to lower oil and gas prices, lower volumes, and lower refining margins, Shell says.
In the last quarter of 2023, Shell made $7.3bn, up from $6.2bn in the third quarter of last year, but lower than the $9.8bn made in Q4 2022.
The oil giant has also announced a new share buyback programme of $3.5bn, and is also lifting its dividend by 4%.
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
These are tricky times for central bankers. Growth is being held back by high interest rates, while inflation is still over target despite falling back from the peaks of the last two years.
So the Bank of England has plenty to ponder, as it prepares to set interest rates at noon today.
The City is confident that the Bank will leave interest rates on hold at their current 16-year high of 5.25%. With inflation at 4% – twice the BoE’s 2% target – policymakers probably won’t feel confident easing policy.
The money markets reckon there’s a 99% chance that the Bank holds rates unchanged today, with a 1% possibility of a shock rise to 5.5%.
The Bank may also cut its forecast for inflation this year, while investors also expect the BoE to signal when rate cuts are likely to start this year.
The Bank of England is likely on Thursday to deliver a brighter outlook for the UK economy, reducing its forecast for inflation this year and potentially opening the way to interest-rate reductions that could boost growth https://t.co/bmoBKJQBuZ
Rates have been held at 5.25% since last August. But the nine members of the Bank’s monetary policy have been split at recent interest votes – with some hawkish members pushing for higher borrowing costs.
April LaRusse, head of investment specialists at Insight Investment, says:
“We don’t expect any change in UK rates tomorrow, but the vote is going to be fascinating. At the last meeting of the Monetary Policy Committee in December three members of the committee voted to increase interest rates to 5.5%.
A lot has changed since then; the US Federal Reserve have pivoted to a more dovish outlook and markets are now pricing in a series of UK interest rate cuts starting in May. With inflation now considerably below the Banks own forecasts we expect a shift in tone – but the Bank is going to face a tricky job to keep market perceptions on a realistic path.”
Last night, America’s Federal Reserve left interest rate on hold, while Fed chair Jerome Powell tried to cool expectations that the Federal Reserve would begin cutting interest rates as soon as March.
Powell insisted a March cut was not the Fed’s “base case”, seen as an indication that the Fed could delay easing monetary policy until May.
That, and jitters about the health of US regional bank New York Community Bancorp, knocked stocks in New York last night. It cut its dividend and posted a surprise loss, renewing fears over the health of similar lenders.
The S&P 500 index of US shares lost 1.6%, while the tech-focused Nasdaq Composite lost 2.2%. Google’s parent company, Alphabet, lost 7% after missing advertising revenue targets in its latest results.
The S&P 500 extended its losses and fell 1.6% today after #Fed Chair Jerome Powell ruled out rate cuts starting as soon as March – a hawkish stance relative to market expectations, in my view. I don’t think this Fed-induced equity pullback will last. More on my take 👇
The UK Labour Party will be wooing business chiefs, and vice versa, today as it holds its largest ever business conference.
Around 400 senior business leaders will gather in London for speeches, panels and roundtables in central London, at an event where tickets sold out in just a few hours.
With a general election due within a year, Labour are expecting business leaders from companies such as Google, Shell, AstraZenaca, Airbus, and Goldman Sachs.
They hope the conference will demonstrate the party’s “commitment to work hand in glove with the business community” and will use it as an opportunity to reveal its business policy plans after two major industry reviews.
