The Bank of England increased interest rates by 0.15% to 0.25% at the latest meeting. Although there had been speculation over a rate hike at this meeting, the consensus was for the bank to wait until February. The bank noted uncertainties surrounding Omicron, but considered that elevated inflation pressures demanded immediate action, especially with inflation set to increase to 6% early next year. There was an 8-1 vote for the decision with Tenreyro voting to wait for more information. According to flash data, the UK PMI manufacturing index retreated to a 3-month low of 57.6 from 58.1 previously and in line with consensus forecasts. There was a sharper decline in the services-sector index to a 10-month low of 53.2 from 58.5 in October with a notable retreat in business confidence while cost pressures eased.
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The Euro-zone flash manufacturing index edged lower to 57.8 for November from 58.4 the previous month, but marginally above consensus forecasts. The services-sector recorded a larger than expected decline to an 8-month low of 53.3 from 55.9 the previous month with the German services sector in contraction. The ECB left interest rates at 0.0% following the latest policy meeting, in line with expectations. The central bank announced that the PEPP bond purchases would end in March 2022. The bank, however, also announced that the on-going APP bond-buying would continue at an increased rate of EUR40bn in the second with a reduction to EUR30bn for the third quarter and EUR20bn for the fourth quarter. Reinvestments will continue into 2024 and there was no formal end date for APP purchases.
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US initial jobless claims increased to 206,000 in the latest week from 188,000 previously and slightly above consensus forecasts of 200,000 while continuing claims declined to 1.85mn from 2.00mn previously. Housing starts increased to an annual rate of 1.68mn from 1.50mn previously and above expectations of 1.57mn while building permits increased to an annual rate of 1.71mn. The Philadelphia Fed manufacturing index retreated to 15.4 for December from 39.0 previously and well below consensus forecasts of 30. There was a sharp slowdown in the new orders and unfilled orders components with shipments growth also slowing. Employment continued to increase strongly on the month while there was a slight easing of inflation pressures.
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