Bank of England policymakers said they were exploring negative rates. This was the clearest signal yet that the BoE may consider cutting interest rates below zero for the first time in its history as the economy gears up for a period of unusual uncertainty. Committee members voted unanimously to keep their main stimulus programmes on hold for now and kept the size of the bond-buying programme at 745 billion pounds. A dive into negative rates would put the BOE on a path already taken by some European peers and the Bank of Japan. Sterling fell sharply after the announcement, weakening by around 0.6% on the day but quickly recovered to trade now at 1.2969.
The number of Americans filing new claims for unemployment benefits fell less than expected last week and applications for the prior period were revised up, suggesting the labour market recovery had slowed down amid fading fiscal stimulus. Fed Chair Jerome Powell said on Wednesday that more fiscal support was likely to be needed for the economy. Initial claims for state unemployment benefits fell 33,000 to a seasonally adjusted 860,000 for the week ending September 12. The economy has recouped 10.6 million of the 22.2 million jobs lost at the depth of the coronavirus crisis.
Japan’s core consumer prices fell at their fastest pace in almost four years in August, dragged mostly by government help for domestic travel aimed at supporting the struggling tourism sector. Bank of Japan Governor Haruhiko Kuroda said they monitor not just price trends but jobs growth in guiding policy, signalling a readiness to ramp up stimulus if job losses heighten the risk of deflation. The core consumer price index fell 0.4% in August from a year earlier. The main factor for the fall was a price decline in accommodation and hotels after the government launched subsidies for national travel discounts from late July to revive tourism. Japan’s economy shrank an annualised 28.1% in April-June, while new PM Yoshihide Suga pledged to continue his predecessor’s growth policies.
The dollar was little changed against the yen after hitting a seven-week high at 104.59. The greenback has lost more than 1.2% against the Japanese currency this week, set for the biggest fall since mid-June. Against the euro, the yen hovered near a 2-month high changing hands at 123.87. New Zealand dollar hit a two-week high of $0.6785 after Finance Minister Grant Robertson sounded positive about the economy's recovery prospects in television interviews. The Australian dollar changed hands at $0.7313 while the Swiss franc was last quoted at 0.9089.
