Bank of England and ECB tipped to leave interest rates unchanged today after Fed’s dovish hold – business live

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

One down, two to go. It’s the Bank of England and the European Central Bank’s turn to set interest rates today, a day after the US Federal Reserve cheered investors with a clear signal it will cut rates next year.

Like the Fed, both the BoE and the ECB are very likely to leave interest rates on hold today.

But (also like the Fed) the focus will be on how quickly Europe’s major central banks will cut borrowing costs next year.

The money markets are indicating that ‘no change’ from the BoE at noon today is a 94% near-certainty, which would leave rates at a 15-year high of 5.25%

After all, UK inflation is more than double the Bank’s 2% target (at 4.6% in October). And after wage growth slowed in the last quarter, the Monetary Policy Committee will want to see more signs of easing price pressures.

But looking into 2024, the markets now expect UK rates to be cut by a full percentage point by the end of next December, to 4.25%. Yesterday’s news that the UK economy shrank in October has raised fears that Britain could be sliding into a recession

For the European Central Bank, the inflationary picture a litte more pleasing – consumer prices in the eurozone only rose by 2.4% in the year to November.

The ECB is expected to leave its deposit rate unchanged at 4.0%, while its inflation expectations could be revised down in the latest macro forecasts drawn up by its staff.

Last night, the Dow Jones industrial average closed at a record high, as traders cheered the news that most Fed policymakers expect US interest rates to be cut three times in 2024.

This has bolstered hopes that the US can avoid a recession, as Jim Reid, strategist at Deutsche Bank, explains:

Yesterday’s FOMC meeting did its best to give investors an early Christmas present, all packaged with a bow and extra special gift wrapping. In turn this added more fuel to the soft landing narrative.

European markets are set to rally today too, with the FTSE 100 index forecast to rise almost 1%.

In a busy day for central banks, Switzerland and Norway are also setting rates today.

The agenda

• 8.30am GMT: Swiss National Bank interest rate decision

• 9am GMT: Central Bank of Norway (Norges Bank) interest rate decision

• 12pm GMT: Bank of England interest rate decision

• 1.15pm GMT: European Central Bank interest rate decision

• 1.30pm GMT: US retail sales for November

• 1.30pm GMT: US weekly jobless claims

• 1.45pm GMT: European Central Bank press conference