Relief as UK rate hike rumour is quashed

RELIEF rippled through UK markets yesterday after the Bank of England (BOE) indicated it was in no hurry to raise interest rates, while fears US rates were set to rise from lows continued to hurt emerging markets.

Many investors were keeping moves small ahead of US jobs data today that could give a strong pointer to when the Federal Reserve will raise rates. US equity futures were up 0.2 percent.

Sterling fell sharply, gilt futures rose and UK stocks got a boost after the British central bank said one official had voted to raise interest rates at its August meeting. That confounded expectations that at least two members and possibly three of the bank’s monetary policy committee would vote for a hike.

Traders said expectations of a rate hike were being pushed back to mid-2016.

“The single vote for a rate rise from the monetary policy committee… offers a small signal that a rate rise is inching closer,” said Andrew Wilson, the Europe, Middle East and Africa chief of Goldman Sachs Asset Management.

Sterling fell 0.6 percent against the dollar to $1.5509 (R19.7895), having traded at $1.56 before the BOE’s bumper release of data including its interest rate decision, meeting minutes and new economic forecasts. – Reuters