Yesterday saw the release of more positive news regarding the UK economy. The unemployment rate fell to 5.8% from 6%, a fall greater than the market had expected. At the same time data from the Office for National Statistics (ONS) showed that average earnings excluding bonuses had grown to 1.8% from a year earlier. With CPI at 0.5% consumers are now seeing real wage growth for the first time since the financial crisis began. The question remains as to what the British public decide to do with their extra spending power. Do they treat themselves to the things they have put off buying in the belief that the lower price at the petrol pumps is only a temporary relief, or do they save?
Savings in cash, unless able to take advantage of NS&I pensioner bonds, look certain to remain unattractive for longer, the release of the Bank of England's MPC minutes yesterday revealing a 9-0 vote in favour of no change. The two previous dissenters, Martin Weale and Ian McCafferty, have now altered their thoughts to in line with the other MPC members, in light of persistent low inflation and the increasing downside risks from the slowdown being witnessed in the Eurozone.
With regard to the latter, today sees the final day of the ECB monthly meeting, from which the market is now widely expectant of the announcement of QE. Leaks yesterday suggest that this will amount to 50bn Euros a month, starting in March of this year and lasting through to December 2016. This is expected to be focused predominantly on sovereign bonds but may also include non-financial corporate bonds. This would add 1.1trn Euros to the size of the ECB's balance sheet. All is still not clear however, with the German Bundesbank president to be a known dissenter on the belief that it will push back much needed structural reforms. All eyes will be on the press conference at 2.30pm today.