Brent Crude Oil Price Still Bounces Off Lows, While Silver, Sugar Prices Rally

Commodity

Summary:

The Brent crude oil price continues to recover from its multi-year low but may soon encounter resistance, while silver and sugar prices rally.

Brent crude oil recovers further from early September low

Brent crude oil futures’ prices are still recovering from their 68.53 early September low, a level last seen in November 2021, as oil sentiment is the most bearish in over a decade, perhaps pointing to an imminent reversal of fortunes for the commodity (see here).

The 5 and 21 August lows at 74.97-to-75.24 remain in focus but are likely to stall the bounce, at least temporarily. Having said that, immediate upside pressure will be maintained while Monday’s low at 71.18 underpins, together with the 9 September low at 70.51.

Below the early September 68.53 low lie the mid-May, August and November 2021 lows at 65.74-to-64.52.

Brent Crude Oil Price Still Bounces Off Lows, While Silver, Sugar Prices Rally_1

Spot silver price revisits two-month high

The spot silver price’s over 11% rally from its early September low has so far taken it to the $31.24 per troy ounce mark, which is back in sight following Wednesday’s wobble and brief drop to $29.71. While it underpins, immediate upside pressure should remain in play.

Above $31.24 beckons the July peak at $31.75 which remains in sight. En route lies the 10 June high at $31.55 and further up the May peak at $32.51.

Brent Crude Oil Price Still Bounces Off Lows, While Silver, Sugar Prices Rally_2

Sugar price surges to five-month high

The price of sugar has risen sharply due to reduced supply and in doing so has overcome its July and August peaks at 20.11 and 20.79, both of which should now act as support levels.

The sugar price is now trading at levels last seen in April with the early April peak at 22.65 representing the next upside target for the front month futures contract. Brent Crude Oil Price Still Bounces Off Lows, While Silver, Sugar Prices Rally_3

Brent Crude Oil Price Still Bounces Off Lows, While Silver, Sugar Prices Rally_3

Risk Warnings and Disclaimers

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Warren Takunda

Economic

The Bank of England will likely keep interest rates unchanged but signal it will cut interest rates at a future date, with money markets showing an expectation for the next cut to come in November.

Risks to the Pound will come in the composition of the votes for another rate cut, the tone of the guidance and Bank of England Governor Andrew Bailey's post-decision interviews. Recall, there is no press conference, but Bailey has in recent times given interviews in the hours that follow the decision.

Alvise Marino, Strategist at UBS, says he sees an increase in dovish risks around the decision as a potential catalyst for a tactical GBP pullback.

"If this were to be realised, we would look to fade EURGBP strength to 0.85, the top of our projected range for the remainder of 2024, targeting 0.83," says Marino.

This implies a potential recovery in EUR/GBP to 0.85 in the wake of the decision (Pound-Euro rate reference: 1.1765). The UBS year-end target is 0.83 (1.2050), which suggests near-term weakness won't derail the broader Pound Sterling rally.

Strategists at Danske Bank see a similar pattern playing out and say to expect the market reaction to be rather muted upon announcement.

"On balance, we tilt towards a dovish twist which does suggest some slight EUR/GBP topside following the release of the statement, as has been the case the past meetings," says Danske Bank.

Pound to Euro Rate Due a Setback on Bank of England Decision_1

Above: "EUR/GBP tends to move higher on BoE" - Danske Bank.

That said, currency strategists at the Scandinavian lender say they still expect "EUR/GBP to continue its recent move lower driven by UK economic outperformance, BoE lagging peers in an easing cycle for the time being and tight credit spreads."

With the Fed having cut by 50bp last night, the UK now offers the second-most attractive interest rates in the G10, and this should continue to hoover up global investor capital.

Analyst are expecting a 7-2 vote split in favour of rates to remain unchanged at 5.0%, with Ramsden and Dhingra voting for a cut.

The Pound will soften if more members opt to vote for a cut, as this would suggest members of the Monetary Policy Committee are leaning towards an accelerated pace of cuts in the future.

Currently, markets see just one more cut in 2024, but there remain risks that this could rise as investors consider whether the Bank could ape the Federal Reserve and deliver 50bp cuts.

However, given the robust economy and stubborn inflationary pressures, this is unlikely for now. So, while near-term downside risks lurk for Sterling, it could be some time before the broader constructive setup deteriorates.

Source: Poundsterlinglive

To stay updated on all economic events of today, please check out our Economic calendar

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Warren Takunda

Stocks

London stocks were set to gain at the open on Thursday after the US Federal Reserve cut rates by 50 basis points and as investors eyed the latest policy announcement from the Bank of England.

The FTSE 100 was called to open around 80 points higher.

Kathleen Brooks, research director at XTB, said: "The US may have experienced whipsaw price action on the back of yesterday’s Fed rate cut, but there has been a straightforward welcome to the Fed’s dovish leap into its rate cutting cycle in Asia and Europe. The Nikkei is higher by 2.5% and the Hang Seng is higher by more than 1.8%. European futures markets are also pointing to a higher open later this morning, the FTSE 100 is expected to open up 0.7%.

"US futures are also higher on Thursday morning. The gold price initially rallied to a fresh record high on the back of the 50bp rate cut from the Fed, before faltering at this level, however the price of gold is rising once more as we move towards the European open."

The Bank of England decision is due at midday, with no change to rates expected.

Brooks said traders will be parsing the Bank’s statement and minutes to see what it could do next.

"There are two things worth watching: 1, if the BoE sounds concerned about the UK’ s growth outlook, this could take the shine off sterling. 2, The BoE could increase the size of its quantitative tightening programme to reduce the size of its bloated balance sheet. If this happens then it looks like the BoE will be giving with one hand (expected future rate cuts) and taking away with another (reducing the money supply)."

In corporate news, clothing retailer Next once again upgraded annual earnings guidance as full price sales in the first six weeks of the second half of the year "materially exceeded" expectations, rising 6.9%.

It lifted 2024/25 pre-tax profits forecasts £15m to £995m, up 8.4% on last year, after interim profits for the six months to July surged 7.1% to £452m.

Online grocer and logistics group Ocado upgraded its revenue guidance following a strong third-quarter performance which saw retail revenues jump 15.5%.

The company is now targeting low double-digit percentage growth in sales over the year to 3 December, from the £2.8bn generated last year. That’s up from earlier guidance for mid-high single-digit growth given in July.

Source: ShareCast

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Danske Bank

Central Bank

Economic

In focus today

Norges Bank (NB) will announce its rate decision at 10.00 CET followed by a press conference at 10.30 CET. We believe that NB will keep the policy rates unchanged, and signal that rates will be kept at that level for some time. We expect that the rate path in the monetary policy report will be adjusted downwards, signaling roughly a cut every quarter next year, significantly less than today’s market price indicates, so a hawkish signal to markets.

In the UK, Bank of England (BoE) will announce its bank rate decision following the monetary policy meeting at 13.00 CET. We expect BoE to keep the bank rate unchanged at 5.00% in line with consensus and market pricing. In terms of communication, we anticipate BoE to stick to a cautious language and deliver a dovish twist to its communication. We expect a rather muted rection in EUR/GBP with risks tilted to the topside. Read more in Bank of England Preview – Proceeding with caution, 16 September.

We expect the Central Bank of Turkey to keep the policy rate unchanged today, in line with market consensus. The momentum in underlying inflation continued to accelerate in August. However, in our view this does not yet constitute a “significant and persistent deterioration in inflation” that is the CBRT’s pre-condition for further policy tightening.

Early Friday, we will have a rate decision and August CPI print out of Japan. We expect no changes from the Bank of Japan following the hawkish turnaround at the late-July meeting. The bond market rally since then and cheaper oil prices have been a boon to JPY, which makes the initial motive for hiking rates less acute. We expect the next hike from the BoJ in December.

Regarding the CPI print, we previously got Tokyo CPI data indicating that price pressures picked up in August. Core inflation remains below 2%, though. The big question remains whether the recent recovery in purchasing power will support a pick-up in spending and push core inflation back above 2%.

Economic and market news

What happened yesterday

In the US, the Federal Reserve (Fed) decided to cut its target rate range by 50bp to 4.75-5.00%. This was a bigger cut than we expected. During this week markets gradually priced in a higher probability of the 50bp rate cut rather than the 25bp that we expected. The updated dot plot signals a total of 50bp of additional cuts for remainder of 2024 (so 25bp at each of the remaining meetings). For 2025, the Fed signals 4x25bp worth of additional cuts and 2x25bp also for 2026. We expect the Fed to ultimately deliver a faster and shorter cutting cycle than the ‘dots’ suggest. See Research US – Fed review: Going for the soft landing, 18 September.

The initial market reaction was for declining rates and weaker USD. However, the market reaction turned around and 10Y UST yields ended the session up by 6bp, while the 2Y tenor was close to unchanged. EUR/USD initially rallied towards 1.1190 following the 50bp rate cut but returned to around the 1.1120 mark after the press conference. USD strengthened further overnight where we briefly saw EUR/USD hit 1.070, but it is now back just below the 1.112 mark where it all started prior to the announcement.

In the euro area, the final HICP print confirmed the flash release at 2.2% y/y and core inflation at 2.8% y/y. Domestic inflation in the euro area measured by the ECB’s ‘LIMI’ indicator declined to 4.22% y/y in August from 4.26% in July. With the August data we thus still see this very sticky domestic inflation with strong momentum.

In the UK, August CPIs were fully in line with consensus expectations; headline at 2.2% (prior: 2.2%), core at 3.6% (prior: 3.3%) and services at 5.6% (prior: 5.2%). Monthly pressures slightly higher in the core and service measure with upward contributions stemming from transport (air fares) and recreation and culture, explaining the slight move lower in EUR/GBP on the release. The print does not change our view of an unchanged decision from BoE later today.

Equities: Global equities were lower yesterday, but the movements were minor considering the stakes at the Federal Reserve meeting. Add to the puzzle the positive trends in Asia this morning and the markedly higher futures in Europe and the US. For those not following intraday movements, it is important to note that the initial equity market reaction to the policy statement was quite positive. It was not until after Powell’s press conference that we observed a decline in equities. Without delving deeper into the details, the Fed managed to implement what we previously termed a semi-hawkish 50 basis point cut, without emphasizing the weakness in the labour markets too heavily. Although there was some divergence within sectors, it was minimal, and most notably, there was a slight outperformance in small caps. In the US yesterday, the indices closed as follows: Dow -0.3%, S&P 500 -0.3%, Nasdaq -0.3%, and Russell 2000 +0.04%. This morning, Asian markets are experiencing gains, led by a strong performance in Japan and a weakening yen. Futures in Europe and the US are also trending higher.

FI: Yesterday’s 50bp rate cut ‘surprise’ from the Fed did not trigger significant volatility, as the central bank kept its guidance of a gradual return to normal. The initial market reaction to the rate cut announcement was a bullish steepening of the UST curve, but the move faded through the press conference as Powell struck a relatively upbeat tone on the economic outlook.

FX: The 50bp Fed cut initially led to a softer USD across the board, but most of the reactions reversed during Powell’s press conference. GBP, NOK, CHF gained most against the USD in the G10 space, while EUR/USD remains more or less unchanged, just above the 1.11 mark. In the Scandies today’s most important event is the Norges Bank meeting.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Economic

The Federal Reserve undertook a major shift in the direction of monetary policy Wednesday, cutting short-term interest rates by a fairly aggressive half percentage point and projecting substantial further rate reductions over coming months and years.

Brushing aside concerns that a rate cut this close to the November presidential election might be construed as political, Chair Jerome Powell explained the move by saying that increased confidence in inflation reduction and greater concern about employment justified “recalibrating” monetary policy to a “more neutral” stance.

Powell made clear that more monetary easing is in the offing, saying the Fed has “made a good start” toward making interest rates “more normal,” and he said the size of the rate cut should be seen as “a sign of our confidence that inflation is coming down to 2% on sustainable basis.”

At the same time, though, he said the Fed’s rate-setting Federal Open Market Committee “will not be in any rush,” but will set rates on a “meeting by meeting” basis in response to what incoming economic data seem to say about “the outlook and the balance of risks.”

Declining to specify the pace of future rate cuts, Powell said the FOMC could move faster or slower, or take a “pause” as warranted by the economic data.

Although some financial market participants had called for a more modest 25 basis point rate cut, the FOMC decided to reduce the federal funds rate by 50 basis points to a target range of 4.75% to 5.00%, after leaving it unchanged since last July. In a relatively rare dissent, Fed Governor Michelle Bowman opposed the action, because she favored a 25 basis point move.

The FOMC had previously raised its policy rate 525 basis points to combat inflation after holding it near zero for two years through March 2022 to counter the pandemic’s economic fall-out.

In their revised quarterly Summary of Economic Projections, the 19 FOMC participants projected the funds rate will end 2024 at a median 4.4, implying 50 basis points of further reductions to a target range of 4.25% to 4.5% over the final two meetings of the year.

The officials deemed that “appropriate policy” will require further rate reductions next year.They project the funds rate will fall by another 100 basis points to a median 3.4% by the end of 2025 (a range of 3.25% to 3.5%), and to 2.9% by the end of 2026 (a range of 2.75% to 3.0%).

Significantly also, the officials further raised their estimate of the “longer run” funds rate by a tenth to 2.9%. Implicitly, that includes the 2% inflation target plus a 0.9% real interest rate, implying that the FOMC would need to lower the nominal funds rate an additional 200 basis points to get the policy rate to “neutral” – something which Powell said needs to be done.

As projected, the funds rate will reach that neutral 2.9% level at the end of 2026.

The FOMC had previously raised the longer run estimate a tenth in March and two tenths in June, as Fed officials came to believe that the real equilibrium short-term interest rate (r*) had risen. A higher real rate implies a higher neutral rate and, in turn, a higher nominal funds rate to achieve the Fed’s dual mandate objectives.

The distribution of projections in the FOMC’s “dot plot” shows considerable division among officials. While nine favored cutting the funds rate to a range of 4.25% to 4.5% by the end of 2024, seven favored cutting it to a range of 4.5% to 4.75%..

The economic forecasts accompanying the rate projections support the FOMC’s plans for continued monetary easing.

The officials forecast that PCE inflation will end 2024 at 2.3% – three tenths lower higher than forecast in June. Core PCE inflation is expected to close out the year at 2.6% — down from 2.8%.PCE inflaion is forecast to fall to 2.1% next year and then to 2.0% in 2026. Their forecast of 2.0% real GDP growth is down from the 2.1% forecast in June. The unemployment rate is forecast to be 4.4%, up from 4.0% in the June SEP, and to go no higher than that next year.

The FOMC’s much anticipated, but nonetheless momentous decision, comes after a series of data reports showing a combination of moderating inflation and cooling labor markets. In August, the consumer price index was up 2.5% from a year earlier, down from July’s 2.9%. Core CPI was up 3.2%. Non-farm payroll gains slowed to 142,000 last month, but the unemployment rate fell a tenth to 4.2%, and average hourly earnings accelerated to 3.8%. Real GDP growth, meanshile, has continued at 2% or more.

In announcing the rate reduction, the FOMC necessarily made important changes to its policy statement. Gone is the previous assertion that “the Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.” Instead, the key third paragraph of the new statement says, “Inconsidering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”

In the preceding paragraph, the FOMC now says, “The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”

By contrast, the FOMC had previously said, “The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”Talking to reporters after the FOMC announcements, Powell defended both the timing and the size of the rate cut, while insisting that the action was not in any way designed to help or hurt either presidential candidate.

Explaining why the FOMC had waited until now to start lowering rates – well after other central banks had begun doing so – he said, “our patient approach has paid dividends” in terms of having “gained confidence that inflation is moving sustainably to 2%.”

Powell denied that the Fed has gotten “behind the curve” by waiting to cut rates.

Explaining why the FOMC moved ahead with a 50 basis point cut, he echoed the FOMC statement. “As inflation has declined and the labor market has cooled, the upside risks to inflation have diminished and the downside risks to employment have increased. We now see the risks to achieving our employment and inflation goals as roughly in balance, and we are attentive to the risks to both sides of our dual mandate.”

Powell said, “this recalibration of our policy stance will help maintain the strength of the economy and the labor market and will continue to enable further progress on inflation as we begin the process of moving toward a more neutral stance.”

He emphasized “we are not on any preset course. We will continue to make our decisions meeting by meeting.”

Powell said the FOMC was conscious that “that reducing policy restraint too quickly could hinder progress on inflation,” but that “at the same time, reducing restraint too slowly could unduly weaken economic activity and employment.”

The Fed chief also stressed that the FOMC is prepared to be flexible in its “meeting by meeting” approach to policy making.

“As the economy evolves, monetary policy will adjust in order to best promote our maximum employment and price stability goals,” he said. “If the economy remains solid and inflation persists, we can dial back policy restraint more slowly. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we are prepared to respond.”

In this “process of recalibrating our policy stance…to place a that’s more appropriate,” Powell said, “we’re not in a rush to get this done…. We can go quicker if that’s appropriate; we can go slower if that’s appropriate, “or we can pause.”

Calling both the economy and the labor market “solid,” he suggested the FOMC can afford to take its time and move incrementally. “We can continue to remove restriction, look at how the economy reacts to that… (and) ask ‘is our policy stance appropriate.’”

“In no sense is the Committee in a rush,” he went on. “We’ve made a good strong start to this, which is a sign of our confidence that inflation is coming down to 2% on sustainable basis, so we can make a good strong start’ at easing.

“We’re going to go carefully meeting by meeting and make our decisions as we go,” he added.

In light of weaker jobs data, including ta more than 800,000 downward seasonal adjustment to payrolls, Powell was asked whether the FOMC had waited too long to start lowering rates.

“We don’t’ think we’re behind,’he replied. On the contrary, “we think (our action) is timely .… The intention is not to get behind.”

Powell warned markets not to assume that the FOMC will continue cutting rates by 50 basis points per meeting. “I don’t think anyone should look at this and think this is the new pace.”

“We’re recalibrating policy over time to a more neutral level,” he elaborated. “We’re moving at a pace we think is appropriate given the base case for the economy.”

The size and frequency of future rate cuts will depend on how the economy evolves, Powell said, adding that the Fed has acted efficiently to achieve its dual mandate of price stability and maximum employment.

Defending the Fed’s past actions, he said. “We think our policy was appropriately restrictive.”

“Now, we think it’s time to begin the process of recalibrating to a stance that’s more neutral as opposed to restrictive,’ he reiterated. “That process will take some time…”

As the “recalibration’ process proceeds, he said “other rates will come down as well.”

In fact, market rates have been falling in anticipation of Wednesdays rate cut. For example, since the July 31 FOMC meeting, the 10-year Treasury note yield has fallen from 4.1340% to 3.60% on the eve of Wednesday’s meeting, and that has translated into a similar decline in mortgage rates.

Source: MaceNews

To stay updated on all economic events of today, please check out our Economic calendar

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Pepperstone

Central Bank

Economic

Where We Stand –

The dust continues to settle on the FOMC’s ‘jumbo’ 50bp cut this morning, albeit with such a reduction having been framed as a ‘recalibration’ in policy, rather than a sign of things to come, particularly with the ‘dot plot’ pointing to 25bp cuts at each of the final two meetings this year. A “hawkish 50bp cut”, anyone?

In any case, stocks have lurched higher overnight, with ‘green on the screen’ across the globe, as buyers come to the fore once more, with both the S&P 500 and Nasdaq 100 futures gaining well over 1% at the time of writing. The path of least resistance continues to lead to the upside.

Despite Chair Powell being at pains to stress that participants should not consider 50bp cuts the norm from here on in, the USD OIS curve has priced an aggressively more dovish outlook, seeing around 70bp of further easing by year-end, almost an entire rate cut more than the dots signalled. Reining in market expectations could well be the first task for Fed speakers, when the blackout period ends.

Another point that was interesting from yesterday’s FOMC is the faith that policymakers have in their economic forecasts. With inflation still above target, unemployment at 4.2% (and having fallen in August), plus the economy having grown by more than 2% in seven of the last eight quarters, there is little at face value to suggest the need for such a sizeable rate cut. Instead, the move to deliver such a cut was seemingly driven by the 0.4pp upward revision to this year’s unemployment forecast, and 0.2pp downward revision to the core PCE projection.

If you think the Fed’s forecasts are right, you’ll think 50bp was justified. If you think them too gloomy, as I do, you’ll think 50bp was over-the-top. Either way, most folk will be hoping that this is not a repeat of the last two times the FOMC kicked-off an easing cycle with a 50bp move – 2007, and 2001, are not years that many look back on fondly.

For markets, yesterday’s FOMC was a rollercoaster ride, with the knee-jerk equity & Treasury demand, plus USD weakness, on the decision itself fading rather rapidly. The greenback ended higher, with the DXY reclaiming the 101 handle, consolidating there overnight, as all G10s gave up earlier gains. This included a rather rapid retracement in cable from a 2-and-a-half year high just shy of 1.33. If you’d told me, this time yesterday, that the buck would end the day in the green after a 50bp cut, I probably wouldn’t have believed you.

In any case, yesterday’s decision doesn’t feel like a game-changer from a broader perspective. The forceful Fed put remains in place, with policymakers clearly willing and able to move quickly with rate cuts were the economy to roll over further. At the same time, there was relatively little clarity on the pace at which rates will return to a neutral level, giving FX and FI operators relatively little to go off.

The issue here, for policymakers and market participants alike, is that while the direction of travel – i.e., rate cuts – may be clear, the speed of the journey, and the destination to which we are travelling, are both unknown!!

Crudely, though, Powell & Co.’s reaction function for now seems to be that 25bp cuts will come, at every meeting in the short-term, unless data – particularly jobs figures – softens beyond expectations, at which point 50bp moves are in the frame once again.

Look Ahead –

Another busy day of policy decisions awaits, though today’s events should be somewhat more straightforward to navigate.

The ‘Old Lady of Threadneedle Street’ highlights proceedings, with the BoE’s MPC set to keep Bank Rate unchanged at 5% this lunchtime, having delivered this cycle’s first rate cut back in August. Then, in a 5-4 vote, the MPC set a relatively high bar to further easing, with a cut off the table this time around, particularly considering yesterday’s rise in both core and services CPI, to 3.6% YoY and 5.6% YoY respectively.

My base case is for an 8-1 MPC vote in favour of holding Bank Rate steady, with just external member Dhingra dissenting in favour of back-to-back cuts, though there is a chance that either, or both, Deputy Governor Ramsden, and new external member Taylor, join her in this dovish camp. Either way, the policy statement should be a ‘copy and paste’ of that issued las time out, signalling a slow and steady approach to removing policy restriction.

The BoE’s latest decision on quantiatitve tightening is also due. At a minimum, despite surging repo usage and signs of a funding squeeze beginning to emerge, I’d expect the annual pace of balance sheet run-off to remain at £100bln, if only to account for the sharp rise in gilt redemptions next year, which would see the pace of active sales drop below £15bln if the overall QT pace were maintained. There is, hence, a case to quicken the overall pace of run-off, though I doubt the MPC go down this route, particularly given the difficulties that policymakers would have in communicating easing conditions via Bank Rate cuts, while simultaneously tightening them via quicker balance sheet run-off.

Away from the BoE, the Norges Bank are also set to decide policy today, though few fireworks are expected, with rates set to remain at 4.50%. Of interest will be whether the NB signal the potential for cuts this year, having previously not pencilled in a rate reduction until 2025. The NOK OIS curve fully prices just one 25bp cut by year-end, hence markets shouldn’t be too surprised by any potentially dovish rhetoric.

Elsewhere, today, the weekly US jobless claims report is worth a cursory glance, if only due to the initial claims print coinciding with the survey week for the September payrolls report. Existing home sales, and the Philly Fed’s manufacturing survey, are also both due, though unlikely to significantly move the needle. The same can be said for remarks from the ECB’s Schnabel, Nagel, Panetta and Knot through the day, which are Knot likely to provide much new information (sorry!).

To stay updated on all economic events of today, please check out our Economic calendar

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BOC

Remarks of Officials

Central Bank

On September 18, the Bank of Canada (BOC) released the minutes of its monetary policy meeting. The main points are as follows:

The economy had grown by 2.1% in the second quarter, which was stronger than anticipated in the July Report. This strength was due mainly to an increase in spending by governments as well as a boost to business investment. Overall consumption growth had slowed to 0.6%, and per capita consumption had contracted by 2.4% while population growth remained strong.

The labor market had continued to weaken, with labor force growth outpacing employment growth. Layoffs remained muted, but unemployment had risen among newcomers to Canada and youth as new workers were having more difficulty finding a job. Wage growth remained elevated when compared with productivity growth. Members expected wage growth to ease in the months ahead given the slack in the labor market.

Consumer price index (CPI) inflation had eased further in July to 2.5%, in line with the Bank's forecast. Core inflation measures continued to ease as well. Shelter price inflation remained the largest contributor to overall inflation. Members noted that this component showed early signs of easing, with growth in mortgage interest costs coming down and rent inflation edging lower from its recent peak. Inflation in prices for services excluding shelter had also eased slightly in July, a sign of the diminished risk that these price pressures would persist.

Members discussed the balance of risks to the outlook for inflation. Some members took the view that the risks were balanced, with strength in shelter and services price inflation offsetting the downward pressure from excess supply. Some had become more concerned with the downside risks to inflation, particularly if the economy and labor market weakened further.

Overall, members agreed that with broad inflationary pressures continuing to ease, it was appropriate to reduce the policy rate further. They decided to cut the policy rate by another 25 basis points to 4¼%. If inflation continued to ease as expected, it was reasonable to expect that the policy rate would decline further.

Minutes of BOC Policy Meeting

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Brent Crude Oil Price Still Bounces Off Lows, While Silver, Sugar Prices Rally

Brent crude oil recovers further from early September low

Spot silver price revisits two-month high

Sugar price surges to five-month high

Pound to Euro Rate Due a Setback on Bank of England Decision

Above: "EUR/GBP tends to move higher on BoE" - Danske Bank.

Source: Poundsterlinglive

London Pre-Open: Stocks Seen Up as Fed Cuts Rate by 50 Basis Points; BoE Eyed

Source: ShareCast

Fed Delivers ‘Hawkish’ 50bp Rate Cut

In focus today

Economic and market news

FOMC Cuts Federal Funds Rate 50 Basis Points, Says Next Steps to Be Decided Meeting by Meeting

Source: MaceNews

Market Thoughts – Thursday 19th September – The Morning After The Night Before

Where We Stand –

Look Ahead –

Minutes of BOC Monetary Policy Meeting: Guard Against Downside Risks to the Economy

Minutes of BOC Policy Meeting

Risk Disclosure