Good morning, and welcome to our rolling coverage of the world economy, the financial market, the eurozone and business.
The Bank of England is in the spotlight today as its Monetary Policy Committee meets to set interest rates. While borrowing costs probably won’t change today, the City will be looking for hints that the long-awaited hike could come in August.
The key issue is whether the Bank still believes the recent weakness in UK economic growth is temporary.
That slowdown scared the MPC away from raising interest rates last month, forcing investors to rethink their expectations about how fast borrowing costs will rise.
The two hawkish members of the MPC, Michael Saunders and Ian McCafferty, will likely vote for a hike today. The majority, though, will (probably!) decide to leave interest rates at just 0.5%.
Mike Bell of JP Morgan Asset Management argues that there’s no reason to raise interest rates yet, especially with Brexit uncertainty bubbling away:
Some lead indicators suggest wage growth could soon start to accelerate, so the case for a rate hike is building.
However, there’s no rush to raise to rates this week given still high political and economic uncertainty.
But you never know….
It’s also an important day for Greece. The Greek bailout ends in August, so Eurozone finance ministers will discuss what debt relief measures are needed to help Athens return to the financial markets.
The Greek government is hoping for substantive measures to address its debt pile, which has swelled to 180% of its GDP.
Spokesman Dimitris Tzanakopoulos told reporters:
“We are optimistic that we are on the verge of a solution with substance.”
Full-blown debt write-offs aren’t on the agenda, but the eurozone could agree to extend the payback data on Greek debt, giving Athens more wriggle-room to recover from years of economic trauma.
Tzanakopoulos argues that Greece needs debt relief in order to become an ‘ordinary’ country again:
“The accepted criteria for all sides is that this solution be convincing for markets and embed the creditworthiness of our country – the final act in restoring the credibility of Greece to be able to plan for the next day like any ordinary country.
The eurogroup will also discuss what ‘surveillance’ measures should be imposed on Greece, to ensure it keeps meeting its commitments even after the bailout is over.
We’ll also keep an eye on Vienna, where Opec members are gathering for tomorrow’s meeting. Some oil ministers (including the Saudis) are pushing for a deal to raise oil output, but others are keener to maintain current production caps….and keep prices higher.
Plus, the latest UK public finances will show how much Britain borrowed last month.
Here’s the agenda:
- 9.30am BST: UK public finances for July
- Noon BST: Bank of England interest rate decision
- 2pm BST: Eurogroup meeting on Greece begins