The Bank of England held the Bank Rate at 3.75% by a 6–3 vote, but five of the six members who backed no change outlined circumstances in which they could support higher rates if inflation pressures persist.
Governor Andrew Bailey said policy may need to tighten if the Middle East conflict continues to push up energy prices, while Clare Lombardelli said the case for raising rates was building.
UK retail sales volumes rose 0.5% in August, reversing July’s 0.5% decline, while sales were 2.4% higher than a year earlier. Over the three months to August, volumes increased 0.9% compared with the previous three months.
Online retailers recovered some of July’s weakness and department stores benefited from improved stock availability. However, fuel sales declined as higher pump prices encouraged motorists to reduce journeys or buy less fuel.
The figures may provide some support to UK retailers, but they also suggest consumer demand remains relatively resilient following the Bank of England’s decision to keep rates at 3.75%.
Wall Street closed sharply higher overnight, with the S&P 500 up 1.2%, the Nasdaq gaining 1.7% and the Dow Jones rising 0.6%, helped by a decline in bond yields and oil prices.
Asian markets were also mostly stronger, with Japan’s Nikkei up around 1.9% following the Bank of Japan’s rate increase to 1.25%, while South Korea’s Kospi gained about 2.3%.
Brent crude fell around 1.3% to $103.43 a barrel, potentially weighing on BP and Shell but easing cost pressures on retailers, airlines and other energy-intensive companies.
Gold traded around $4,374 an ounce, while Brent crude eased slightly to $103.54 a barrel.
