Morning Market Brief: September 22, 2023

The BoE’s turn to hold steady?

At its September meeting, the Bank of England (BoE) elected to hold its policy interest rate steady. While inflation remains elevated, there have been signs of inflationary pressures easing in the UK, which prompted the BoE to pause at this meeting. Several central banks are pausing, perhaps briefly, to gauge how current rates impact economic conditions.?

• The BoE held its Bank Rate steady at 5.25%, which marks the BoE’s first meeting without raising interest rates since 2021. The UK central bank took an aggressive stance, seeking to bring down decades-high inflation.
• The BoE believes inflationary pressures in the UK will soften, particularly over the short term. Still, the central bank is prepared to act with more rate increases should economic conditions warrant such a response.
• The pause by the BoE follows the path of other central banks, notably the US Federal Reserve Board and the Bank of Canada, which both held steady at their September meetings. Conversely, the European Central Bank lifted its key interest rate by 25 basis points at its September meeting.
• Despite the pause, central banks have made it clear that more rate hikes are possible, while the likelihood of a rate reduction this year is relatively low. Economic conditions change quickly, and these banks have all stated they would monitor economic developments before their next meetings.

While central banks now move towards figuring out the top end of their interest rates, financial markets could be hit with some volatility. It will be essential to stay invested and consider positioning your portfolio to maximize performance amid a period of higher interest rates for longer.

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.