BOE may cut rates this year while FED is not likely to hike rates in September

The Monetary Policy Committee of the Bank of England (BOE), in its last meeting which ended on the 14th of September 2016, noted that UK economic data in the near term has been "slightly to the upside relating to the August inflation Report projections." The BOE said that in November, "if a full update full assessment is consistent with its August inflation report" it might cut rates to just above zero. In contrast, recent data from the US data indicates that the economy is softening.

The nine-member Monetary Policy Committee also voted to keep interest rates on hold at 0.25 percent, continue with its stimulus programme of purchasing government bonds at £435 billion and corporate purchases at up to £10 billion.

US retail sales data fell 0.3 percent in August versus minus 0.2 percent expected. US industrial production was also released which fell 0.4 percent deeper than 0.2 percent expected This is the largest decline since March. This indicates that US economy is slowing.

Meanwhile all major currency pairs are trading near their daily open. We believe that currencies would continue to trade in holding pattern until the FOMC meeting, September 20th -21st, 2016.

Federal Reserve (FED) member, Governor Laei Brainard, on Monday said that she would like a see a stronger consumer spending and signs of a rising inflation. This is in line with what FED Chair, Janet Yellen said in many fora that hike in rates will be data-dependent.

As it is now, investors, BOE and FED would be watching keenly data that would be released in coming days/weeks. Many Analysts are of the view that recent data released from the US has dampened the prospects of a rate hike in September. The BOE says it would cut rates  if data continues to improve  before the next  November meeting.