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The Bank of England (BoE) Monetary Policy Committee’s (MPC) decided last week to leave interest rates unchanged due to the economic uncertainty created by a number of weak first quarter data points. However, this week’s labour market data releases provided some cause for optimism.
The Bank of England (BoE) was centre stage this week, with Thursday seeing the announcement of the latest interest rate decision for the UK. The result itself was relatively unsurprising. The BoE’s Monetary Policy Committee (MPC) voted by a 7-2 majority to keep base rate on hold at 0.5%, a result that had been foreseen with a probability of 87% immediately prior to the announcement.
The major event this week was the meeting of the Federal Open Market Committee (FOMC), which sets interest rates in the US. The FOMC has been gradually raising interest rates for over a year, and was widely expected to leave them unchanged at this meeting, which it did.
This week, the ten-year US Treasury Bond Yield breached the psychologically important 3% level. Several prominent fixed income investors, including Jeffrey Gundlach, have claimed that crossing the 3% threshold is a critical factor in determining if the three-decade bull market in bonds has run out of steam.