Bank Industry Insights: September 2024 edition

The first of this fortnight's interest rate announcements came from the ECB, when they made a unanimous decision to cut interest rates by a quarter percentage point from 3.75% to 3.5%. ECB president, Christine Lagarde, referenced falling Eurozone inflation for the reason behind the cut, which is now at a three-year low of 2.2%, trailing only slightly above the ECB's 2% inflation goal. So can we expect another cut at the next meeting? Lagarde signalled that more rate cuts were expected, but downplayed the likelihood of another one in October.

In the UK, inflation remained steady at 2.2% in August, and so last Thursday the BoE decided to hold interest rates at 5% in an eight-to-one decision. As to whether this means a cut will be due again soon, Governor, Andrew Bailey, indicated that another rate reduction may come as soon as its next meeting, provided that inflation stays low, saying that "we need to be careful not to cut too fast or by too much."

Over in the US, the Fed decided to make its first cut in more than four years, by announcing a half a percentage point reduction (with one committee member dissenting in favour of a quarter-point cut). To give this some context, the last time the Fed cut rates by more than a quarter point was in 2020 when the economy was in the throes of Covid-19. So after four years of holding, is this bumper cut down to the Fed playing catch up? Fed chair, Jay Powell, said that “We do not think we are behind, but you can take this as a sign of our commitment to not get behind.”

For those tracking ESMA consultations, my colleagues in Fin Reg bring you a summary of the latest consultation on changes brought by revised MIFIR. This note helpfully sets out the proposed bond liquidity thresholds and deferral regime for bonds in tabular form – one for your virtual notice board! And don’t forget to check out the September edition our Financial Services SpeedRead to catch up on all the key updates from the summer.