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Rates in Flux: The Impact of Trump's Policies and BoE Decisions

The Bank of England (BoE) will announce its money policy today, November 7, 2024. Here are the main points to know:

Market Prediction

Interest Rate Cut: Most people think there’s a 90% chance the BoE will lower the interest rate by 0.25%, dropping it from 5% to 4.75%. This comes after they already cut rates earlier this year.

Recent UK Economic data-

Inflation: Recent numbers show inflation at 2.2%, a little above the BoE's goal of 2%. This makes it harder to decide if they should cut rates again.

Job Market: The job market is strong, with only 4% of people unemployed and wages increasing by 4.9%. This means there are still some pressures on prices.

The GBP/USD exchange rate will drop further if the Bank of England cuts rates by 25 basis points and adopts a cautious, dovish tone in its statements.

Forward Guidance

The BoE has said they will be careful with their decisions and will watch the economy closely before making any changes.

People are watching closely to see what the BoE will say about future money policies, especially with what's happening in the world and at home.

 

After Donald Trump's recent election win, the Federal Reserve’s approach to money policy is under close watch and may change. Here are the main points:

Rate Cuts Coming: The Federal Reserve is expected to lower interest rates by 0.25%, bringing them down to a range of 4.75%. This is part of a trend where central banks are easing policies due to economic conditions.

Inflation Concern: Trump’s planned economic policies, like tariffs and tax cuts, could raise inflation. Some analysts think this might push inflation up by about 1 percentage point, making it around 3.4%, which is higher than the Fed's goal of 2%. This makes it tougher for the Fed to balance controlling inflation and supporting economic growth.

Political Pressure: Trump’s return to the presidency could bring more political pressure on the Federal Reserve. He has previously criticized Fed Chair Jerome Powell, which might affect how the Fed makes decisions in the future.

 

 

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