Bank of England holds fire on rates with Fed to begin tapering bond purchases


Archived Article

This article was correct at the time of publishing however the information contained within it will no longer be current. It may also no longer reflect our views on this topic.


Bank of England holds fire on rates with Fed to begin tapering bond purchases

Central banks came under the spotlight last week with both the Bank of England (BoE) and US Federal Reserve hosting policy meetings. With much speculation that the BoE would vote to raise interest rates, its Monetary Policy Committee ultimately settled for the status quo as it continues to monitor the impact of the conclusion of the Government’s furlough scheme. At the equivalent meeting in the US, the Fed announced it would start its bond tapering process this month in a move that had been flagged to the market in advance. Meanwhile on the Continent, ECB President Christine Lagarde suggested that rates will not be raised until 2023 with the Bank wanting to keep financing conditions favourable as the economy emerges from the pandemic[1].

Eurozone equities took Lagarde’s comments positively, the DAX in Germany posted a weekly rise of +2.3% whilst the French CAC40 gained by +3.1%. UK markets also enjoyed a solid week with the FTSE100 benefiting from some weakness in Sterling. The UK’s main market added +0.9% with the mid-cap centric FTSE250 climbing by +2.1%. In the US, the S&P500 took the taper announcement in its stride with the index reaching yet another record high after a weekly gain of +2.0%. Japanese equities also enjoyed a strong week with the Nikkei 225 jumping by +2.5% after a resounding election win for new Prime Minister Fumio Kishida.

The surprise inactivity of the Bank of England led sovereign bond yields lower in the UK. Downwards momentum was seen across the curve with the 10-year gilt yield retreating by 19 basis points (bps) to 0.85%. In the US, the equivalent duration treasury yield fell by 10bps to 1.45% whilst in the Eurozone, the 10-year benchmark index yield fell by 18bps to -0.23% following the comments from the ECB President.

In the commodity markets, moves were somewhat muted compared to elevated volatility of the prior weeks. Brent crude declined by -1.7% to $82.93 a barrel with copper concluding the week -0.6% lower at $9,573 a tonne. Gold meanwhile posted a weekly gain of +1.9% which moved the precious metal to $1,810 an ounce.


Week Ahead

The preliminary reading of Q3’21 GDP is the standout data released in the UK this week. Retail sales from the British Retail Consortium are also due on Tuesday with industrial and manufacturing production released on Thursday. In the US, the main data to keep an eye on this week include CPI and PPI inflation with the University of Michigan publishing its closely monitored consumer sentiment index on Friday.

German research group ZEW also releases a sentiment indicator this week with its indices for both Germany and the Eurozone focussed on the economy. Other Eurozone data is in short supply on this occasion. Moving to Asia, inflation data is also due from both China and Japan this week in what is a quiet week for headline data from the two countries.


Read last week's market update

US Growth Rate Slows But Developed Market Equities Push Higher


[1] T Rowe Price 05.11.21

[2] Forex Factory 07.11.21



The value of an investment may fall as well as rise. You may get back less than the amount invested.

The value of investments may fall as well as rise purely on account of exchange rate fluctuations.

Past performance is not indicative of future performance.

Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2021. FTSE Russell is a trading name of certain of the LSE Group companies. “FTSE Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

© S&P Dow Jones LLC 2021. All rights reserved.

The information contained does not constitute investment advice. It is not intended to state, indicate or imply that current or past results are indicative of future results or expectations.

Full advice should be taken to evaluate the risks, consequences and suitability of any prospective investment. Opinions provided are subject to change in the future as they may be influenced by changes in regulation or market conditions. Where the opinions of third parties are offered, these may not necessarily reflect those of Rowan Dartington.

Rowan Dartington is part of the St. James’s Place Wealth Management Group. Rowan Dartington & Co. Limited is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales No. 02752304 at St. James’s Place House, 1 Tetbury Road, Cirencester, England, GL7 1FP, United Kingdom.