Governor Andrew Bailey continues to express apprehension about the supply side of economic growth. He reaffirmed the central bank's commitment to taking necessary measures to bring inflation back to the 2% target. However, he cautioned that the descent from the current 4.6% inflation rate could be gradual, leading to the persistence of elevated interest rates.
Recent data from the Bank of England reveals that mortgage approvals increased to approximately 47,400 in October. Despite this, mortgage approvals have declined by over a third since August 2022.
In the United States, Federal Reserve officials hinted at the possibility of interest rate cuts. US Fed Governor Christopher Waller, speaking at an event hosted by the American Enterprise Institute, suggested that if positive economic progress continues for several more months, the Fed might consider lowering policy rates next year, especially if inflation continues its downward trend.
Meanwhile, in the Eurozone, inflation showed a more significant-than-expected slowdown, bringing the 2% target into view. Investors are increasingly speculating that the European Central Bank will implement interest rate cuts sooner than previously indicated by officials. Consumer prices in November rose by 2.4% year-on-year, down from the previous month's 2.9% and below economists' predictions. There is growing anticipation that the ECB could initiate rate cuts as early as April 24.
The GBP/USD pair surpassed the 1.2700 on Friday, reaching its highest point since mid-August 23. In contrast, the GBP/EUR pair continues to fluctuate within the established 1.1500 – 1.1600 range.
No major UK or Eurozone calendar events this week, with UK Final Services PMI on Tuesday the only point of note. From the US, the focus with be the employment data on Thursday and Friday.
