The Daily Update: Unreliable Boyfriend / Non-Farm Payroll

Yesterday the Bank of England surprised the market and left its monetary policy unchanged for November. The base rate was left at 0.10% and the total QE purchase target was also left at £895bn. The decision was markedly less hawkish than markets had been anticipating, who had priced in a +.15% move ahead of the announcement. The Bank’s Monetary Policy Committee (MPC) voted 7-2 to keep its benchmark interest rate unchanged and 6-3 in favour of continuing the existing program of U.K. government bond purchases at a target stock of £875 billion. The MPC voted unanimously to maintain its GBP20bn stock of corporate bond purchases, keeping the total asset purchase program at GBP895bn.

In the statement, the MPC said ‘The Committee judges that, provided the incoming data, particularly on the labour market, are broadly in line with the central projections in the November Monetary Policy Report, it will be necessary over coming months to increase Bank Rate in order to return CPI inflation sustainably to the 2% target’. They also noted that ‘a high degree of uncertainty’ surrounding the near-term outlook for the labour market, following the end of the UK’s furlough scheme at the end of September, was a key factor in its decision.

The decision to hold interest rates has led to accusations that Andrew Bailey, the BoE’s Governor, who voted for a hold, misled markets in the run-up to the decision, earning him the moniker of an ‘unreliable boyfriend’, a nickname first used for his predecessor, Mark Carney, for his inability to communicate with markets.

However, he hit back saying ‘It is not 'unreliable boyfriend' - we didn't say we would act at any particular meeting’ and that any remarks that were made before the meeting were conditional.

Also, it’s the penultimate first Friday of the year, as well as firework night (Remember, Remember the 5th of November, gunpowder, treason, and plot) which means its Non-Farm Payrolls. The estimates before the figures were for 450k jobs added an unemployment rate of 4.7% and participation rate of 61.7%.

The actual number of jobs added was 531k with the previous month’s figure revised up to 312k from 194k. The unemployment rate was lower at 4.6% versus the prior month’s reading of 4.8% and the participation rate fell slightly to 61.6%. The average hourly earnings were on the nose at 0.4% with the yoy figure at 4.9% vs last month’s 4.6%

Enjoy the fireworks this weekend.