Proactive Investors -
- FTSE 100 up 96 points at 7,438
- Bank of England leaves interest rates on hold
- Sainsbury , BT (LON:BT) higher after results, Entain (LON:ENT) falls
BofE cuts growth forecasts, inflation not seen hitting 2% until end-2025
The Bank of England has voted 6-3 to leave interest rates unchanged at 5.25%, a 15-year high, following its two-day meeting.
But the BoE left the door ajar for further rates increases explaining the risks to inlation remain “skewed to the upside.”
“Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term, in line with the Committee’s remit,” the BoE said in a statement.
The BoE expects UK GDP to have been flat in the third quarter, weaker than projected in its August report.
GDP is expected to grow by 0.1% in the fourth quarter, also weaker than projected previously.
The BoE expects CPI inflation to hit its 2% target by the end of 2025.
It added its forecasts are conditioned on a market-implied path for Bank Rate that remains around 5.25 until the third quarter of 2024 before declining gradually to 4.25% by the end of 2026, a lower profile than underpinned the August projections.
Bank of England leaves interest rates on hold
The Bank of England has left interest rates unchanged at its November meeting, extending September’s pause.
The Monetary Policy Committee voted 6–3 to leave rates at 5.25%, the highest level in 15 years, as it continues its battle to bring inflation down to its 2% target.
The consumer prices index rose by 6.7% in the 12 months to September, the same rate as in August, confounding hopes for a fall to 6.5%, according to figures from the Office for National Statistics.
The move follows similar rate pauses in Europe and the US.
BT rings the right numbers but challenges remains
BT has dialled the right numbers with shares up 8.3% at 120.35p.
Bank of America (NYSE:BAC) said the results were “solid,” with “revenue and Ebitda ahead of expectations, supported by a strong Openreach print.”
It noted with slightly lower capex from unit cost efficiencies, cash flow guidance was raised to the upper end of the range and the interim dividend paid as expected.
However, it suggested there are signs of macroeconomic pressure building that could cap upgrades beyond this year with increased consumer mobile losses and Openreach line losses, while pressure builds on BT Business.
“Nevertheless, BT continues to execute well on its fibre build as a longer-term sustainable advantage that should re-rate cash flows and share price,” it thinks.
BofA has trimmed its price target to 187p from 194p and reiterated a buy rating.
But UBS thinks while there may be an initial positive reaction to the better financials, the stock faces a number of “notable risks/overhangs near-term including: VMO2 revisiting M&A discussions with TalkTalk; Sky shifting some of its wholesale broadband business away from Openreach and free cash flow pressures leading to a dividend cut.