The Bank of England’s decision to peg any move in interest rates to the downward progress of unemployment has invested the monthly figures, due today, with huge importance.
In a nutshell, markets don’t believe the jobless rate will take the best part of three years to fall from 7.7 percent to below 7.0, the point at which the Bank said it could consider raising rates from a record low 0.5 percent. For what it’s worth, the consensus forecast is for the rate to be unbudged at 7.7 in August.
There are some reasons to think the Bank might be right – an ageing population working longer, slack within companies (such as part-time working) which can be ramped back up again before any new hiring takes place – but if markets continue to price in a rate rise early than the Bank expects, then it has de facto policy tightening to deal with.
Funny thing confidence. No one could buy a jot of it for three years yet in a month offering the threat of a U.S. default – with Fitch having now put Washington’s credit rating on negative watch — and in which the Italian government almost collapsed, German investor sentiment shot up again.
Auto industry association ACEA is just out saying an extra working day and a surge in UK sales boosted Europe’s new car market in September, providing fresh evidence that demand is slowly bottoming out.