Central Banks Deck the Halls with Cuts and Holds
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Why did the Bank of England’s rate cut come down to a razor‑thin vote?
The Bank of England cuts, no surprise there, but it couldn't have been closer, whilst the ECB kept race on hold, so did the Norge Bank and the RICS Bank. But everyone is expecting the Bank of Japan to lift race to their highest level in decades tomorrow. And we've got US CPI as well and New Zealand GDP. Uh so we've got a pretty busy day to get through for the last one on the morning call calendar. It's Friday, the nineteenth of December, twenty twenty-five. It's the Morning call from Nav. Good morning. Well, not much movement in currencies today. The US dollar's been up and down, uh, but pretty close to where it was a day ago. The Aussie, though, up almost 0.2% to just below 66.2 US cents. US equities are higher, the Nasdaq at 1.7%, a 1% lift in the DAX in Europe.
Uh ten year treasury yields are down three basis points to four point one two. Aussie ten years now at four point seven seven, which is a a few basis points higher than yesterday. An oil pushing higher, one percent for WTI, three quarters one percent for Brent, pushing it back over sixty a barrel, and silver, it's a bit like a yo yo, down two point four percent today, and for a very expensive yo yo. And for our last morning edition of the year, here's Nab's Gavin friend in London. Uh so Gavin, singing as you're in London, let's start with the Bank of England. Five voted for a cut, four voted for rates to say stay, so down they go, but very close. Mm.
Yeah, so twenty five basis points to three seventy five Morningfield, um, as universally expected. The sixth cut uh in the cycle from the peak of five and a quarter. It came across as hawkish, uh to the point you've just made that it was um it was a very close uh call. Um and i I th because markets went into this thinking it perhaps might not be as close a call. We'd had and discussed on this show earlier this week a couple of soft data releases, wages finally dropping below four percent, um and meshing with, you know, employer uh surveys that the Bank of England likes to think about, likes to look at in terms of moving down into the threes area. It's more consistent with inflation at target of the Bank of England.
Inflation data we have. Earlier this week for November, down at three point two percent at the headline. You know, it recall it was only in August the Bank of England was saying inflation is going up to four percent. It never got there. It peaked to three point eight and here we are at three point two. And if we think about into next year, by April we're gonna be down at two and a half percent, perhaps even lower. So I think markets were surprised at the closeness of This and some of the other sort of headlines that came out from the bank about, you know, um future decisions are likely to be an even closer call. I'm not sure how you can get a closer call when you've got four doves, four hawks, and a governor in the middle that's flip-flopping from cut to hold.
By the by, the the point is that when you're getting to this point in the cycle, you've done 150 basis points as you head towards towards whatever you think is neutral, you're gonna start to want a bit more substance before you make a move. I get that, right? But you know, the idea is where is neutral? Nobody knows. It's probably between three percent and three and a half percent. Here we are at three and a half.
But the economy is really slowing. So that would be a case to say, well, uh you know, you you think if the economy's slowing, I mean you need to bolster it uh so low interest rates would help. But also um you you'd be thinking it's inflation is going to become less of a problem if people aren't spending.
Yeah, indeed. So to the point is is that we're not taking this messaging today as a sign or a signal that they're not going to keep cutting. They just need the evidence and we think they're going to get the evidence. We've just talked about the fact that inflation is going to be in April two and a half percent. The Bank of England noted today it's new staff um running the slider all over. They're not formal forecasts, we won't get those until February.
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Chapters
5 chapters
1
Why did the Bank of England’s rate cut come down to a razor‑thin vote?
0:01–5:27
2
How is the ECB’s decision to hold rates influencing euro‑area inflation outlook?
5:27–8:51
3
What does the Bank of Japan’s planned rate hike mean for its first‑time increase since 1995?
8:51–11:37
4
Why are Norway’s and Sweden’s central banks keeping policy steady despite mixed market signals?
11:37–15:04
5
How are the latest US CPI and jobless‑claims data shaping expectations for the Fed?
15:04–16:50