Eurozone Crisis Live: Bank of England and ECB leave monetary policy unchanged

ECB press conference highlights. Bank of England and ECB decide to keep benchmark rates and monetary policy unchanged in August. Eurozone manufacturing returns to growth. Spanish PM denies slush fund claims. Rajoy’s gamble…


Powered by article titled “Eurozone crisis: Berlusconi’s final appeal rejected; central banks hold rates – as it happened” was written by Graeme Wearden, for on Thursday 1st August 2013 20.03 UTC

9.03pm BST

Lizzy Davies: Silvio Berlusconi’s prison sentence upheld by Italian supreme court

And finally, here’s our Rome correspondent Lizzy Davies with the news from the supreme court:

Silvio Berlusconi, Italy’s longest-serving postwar prime minister, has been handed his first definitive criminal conviction in more than 20 years of legal battles but the country’s supreme court spared him the immediate prospect of being barred from public office.

In a long-anticipated ruling, the five judges of the court of cassation emerged from more than seven hours of deliberations to issue a verdict confirming a four-year jail term for the leader of the Freedom People party (PdL), a vital part of Italy’s coalition government.

That sentence had already been cut to one year according to a 2006 amnesty, and, owing to Berlusconi’s age – he will be 77 in September – it will be served through house arrest or community service.

It was enough, however, to place great pressure on the fragile government and prompt fury among his supporters…..

Lizzy’s full story is here: Silvio Berlusconi’s prison sentence upheld by Italian supreme court

And that’s a good moment to stop the blog, I think. Cheers all, and good night from London.

Updated at 9.03pm BST

8.54pm BST

Berlusconi’s lawyers: it’s not over

Silvio Berlusconi’s legal team just released a statement, in which they talk about their dismay over the judgement of the supreme court tonight. They also suggest the possibility of an appeal to the European Courts.

It’s online here. Here’s a rough translation:

There were very solid reasons and legal arguments to reach a full acquittal of Mr Berlusconi.
We will pursue any useful initiative and also [look to] European locations to make sure that this unjust judgment is radically reformed.

8.50pm BST

Meanwhile, in the US courts

In unrelated legal news tonight — former Goldman Sachs vice-president Fabrice Tourre has been found liable on six of seven counts of defrauding investors by violating federal securities law..

The WSJ has a good early take: Former Goldman Trader Found Liable

8.40pm BST

Italian PM and president urge calm

Enrico Letta, Italy’s prime minister, and the country’s president Georgio Napolitano, have both urged Italians to remain calm following the Supreme Court ruling that three-time prime minister Silvio Berluconi is guilty of tax fraud.

Updated at 8.40pm BST

8.24pm BST

Political reaction

Reuters has pulled together some political reaction to the decision to uphold Berlusconi’s conviction for tax fraud, from across the spectrum:

Luca d’Alessandro, head of Berlusconi’s PDL parliamentary justice commission: "This country used to be famous as the cradle of law. Today it has become its tomb, run by a corporation of grave diggers in gowns who have carried out the perfect crime."

But the leader of the centre-left PD, Guglielmo Epifani said, "The sentence has to be respected and carried out."

Beppe Grillo, leader of the populist 5-Star Movement that won a quarter of the vote in the last general election, back in February, declared: "The verdict is like the fall of the Berlin Wall in 1989."

Updated at 8.32pm BST

8.15pm BST

Here’s a photo of the moment that the president of the Italian supreme court, Antonio Esposito, read out that Silvio Berlusconi’s prison term over tax fraud had been upheld, but that the public office ban would be reconsidered by a lower court.

The latter decision means Berlusconi can, for now, remain as a senator.

8.05pm BST

If Berlusconi’s public office ban is cut to three years, then there’s a possibility he could be free to run in the next Italian general election, points out analyst Alberto Nardelli.

He reckons that this evening’s news poses tough problems for Berlusconi’s opponents — as the mainstream centre-left and centre-right (Berlusconi’s PDL) parties are locked in an uncomfortable coalition.

Alberto adds:

• will Berlusconi decide to pull the plug on the Letta Government? I don’t think he will do this despite many in his party pushing for elections.
• how will the centre-left PD react: will they vote (in the Senate) to confirm the ban from public office when it eventually comes?
• if Berlusconi is banned from public office, the ban would expire before the end of Letta’s government if the government serves a full-term – would PD want to go to elections before then and will PD push for a law that would make those definitively sentenced ineligible?

More here: Thoughts on the Berlusconi verdict

Updated at 8.06pm BST

7.42pm BST

Photos: Celebrations at the Supreme Court

Scenes of celebration and fizz being swigged outside the Italian Supreme Court, following the news that Silvio Berlusconi’s final appeal has been rejected.
Two photos from the scene:

Updated at 7.51pm BST

7.28pm BST

The BBC’s Imelda Flattery suggests that house arrest is unlikely to count as cruel and unusual punishment for Silvio Berlusconi:

7.26pm BST

Berlusconi verdict – instant reaction

Italian political expert Alberto Nardelli says the key development tonight is that Silvio Berlusconi’s five-year ban on service in a public office is going to be reexamined:

Vincenzo Scarpetta of the Open Europe think tank underlines the point that the ban hasn’t actually been scrapped:

Updated at 7.30pm BST

7.18pm BST

And here’s Associated Press’s first take:

Italy’s highest court has upheld ex-Premier Silvio Berlusconi’s tax fraud conviction, but ordered a review a five-year ban on public office that was part of the lower court’s sentence.
The court on Thursday confirmed the four-year prison sentence, and ordered another court to determine the length of a public office ban.
This is the first time Berlusconi, a three-time former premier and billionaire media mogul, has been definitively convicted of any crime.

7.14pm BST

Hot off the Reuters terminal, here’s its first report from Rome:

Italy court rejects Berlusconi appeal against tax sentence

Italy’s top court upheld a jail sentence against Silvio Berlusconi for tax fraud on Thursday in a ruling which could throw the country’s fragile coalition government into crisis.
The Court of Cassation confirmed a four-year jail sentence – commuted to one year under an amnesty – imposed by a lower court. But it ordered a further judicial review of a ban on holding public office imposed for the same offence.
The long awaited ruling is likely place the fragile left-right coalition led by Prime Minister Enrico Letta under severe strain although Berlusconi has pledged that his centre-right party will maintain its support for the government.

7.12pm BST

Public office ban to be reviewed

The key question now, though, is what happens about the five-year ban on Silvio Berlusconi holding public office, which the court has now annulled?
The judges have asked for that ban to be reviewed, so we may not know for some time.

The prospect of the former PM being banished from the Senate for years had threatened to destabilise the coalition. As explained at 5.36pm BST, Italy’s coalition government relies on the support of Berlusconi’s party (although he doesn’t serve in Enrico Letta’s cabinet).

On Tuesday, the prosecution recommended cutting the ban to three years, which looked like an admission that the original sentence was too severe (Italy’s legal framework suggested a ban of between one and three years).

7.03pm BST

Historic moment

The verdict of the Rome Supreme Court means that Silvio Berlusconi has run out of legal road — there are no more appeal courts left, and he must now accept the conviction for tax fraud.

And that also means the prison sentence that was handed down by the lower court, and upheld in the last few minutes.

Given his age, though, legal experts have already predicted it would be changed to community service or house arrest.

Definitely a significant moment…

Updated at 7.04pm BST

6.51pm BST

BREAKING: The verdict is in. The Italian Supreme Court has upheld Silvio Berlusconi’s one year* prison sentence for tax fraud in the Mediaset case. It has also ordered a review on the ban on public office that was handed down.

*originally four years, but reduced to 1 year under an amnesty

More to follow…

Updated at 6.53pm BST

6.43pm BST

Any moment now..

6.16pm BST

Scratch that thought — it looks like a verdict has been reached over Silvio Berlusconi’s tax fraud appeal.

Cameras are being allowed into the Supreme Court in Rome now, , so the news could come within the hour. Police have asked journalists to turn off their mobile phones, reports Linkiesta’s reporter Alessandro Da Rold.

Updated at 6.32pm BST

6.03pm BST

Maybe we won’t get the Berlusconi verdict tonight, after all. If the Supreme Court can’t reach agreement in the next couple of hours, everyone might have to come back tomorrow…

Updated at 6.03pm BST

5.52pm BST

No Berlusconi verdict yet. The door of the Supreme Court remains shuttered, as Linkiesta’s Alessandro Da Rold tweets:

5.38pm BST

Supporters of Silvio Berlusconi have gathered at Palazzo Grazioli, Berlusconi’s house in Rome, ahead of tonight’s verdict. Here’s a photo:

5.36pm BST

A quick catch-up

Silvio Berlusconi is caught up in three separate court cases. The appeal under consideration in Rome now relates to last October’s tax fraud conviction involving his Mediaset media empire.
Judges in a lower court concluded that Mediaset had hiked the price of film distribution rights artificially high, to cut its tax liabilities, and said Berlsuconi has spawned "a whole system of tax fraud".
Lawyers for the former Italian prime minister and media magnate have argued this week that he wasn’t really in full control of the company at the time. They also claimed that any offense was tax evasion rather than fraud, so the jail term and public office ban handed down to Berlusconi wasn’t appropriate.
Given his age, Berlusconi would serve any prison term as house arrest. But it’s the prospect of a ban from public office that could shake politics, if Berlusconi retaliated by withdrawing his party’s support for Italy’s coalition.

Here’s a few good backgrounders:

Guardian: Silvio Berlusconi: Italy’s supreme court prepares for verdict on final appeal

BBC: Ex-Italy PM Silvio Berlusconi criminal appeal to finish

Reuters: Italy’s top court to issue verdict on Berlusconi fraud appeal

5.15pm BST

Italian journalist Alessandro Da Rold of Linkiesta reports from inside the courtroom that the Berlusconi verdict might come in around 45 minutes time, at 7pm local time or 6pm BST.

4.58pm BST

Here’s a live feed from outside the Italian Supreme Court in Rome, where Silvio Berlusconi’s appeal verdict may come soon.

Updated at 5.00pm BST

4.54pm BST

Now we wait, for news from Italy…

4.46pm BST

European markets close higher

European stock markets have closed sharply higher. The stream of decent news from the world’s manufacturing sectors, in the UK, US and across the eurozone, sent all the major indices up today on hopes that the global economy strengthened last month.

• FTSE 100: up 60 points at 6681, +0.9%
• German DAX: up 134 points at 8410, +1.6%
• French CAC: up 50 points at 4035, +1.25%
• Spanish IBEX: up 106 points at 8540, + 1.2%
• Italian FTSE MIB: up 336 points at 16818, +2%

Brenda Kelly, senior market strategist at IG, commented:

Anyone backing a eurozone recovery would have been more than pleased with the manufacturing output numbers today. With the exception of Spain they all came in ahead of expectations, with Italy even seeing manufacturing output crossing into expansion territory.

ECB president Mario Draghi reiterated his usual comments with respect to downside risks within the single currency area, which had the useful effect of driving the euro lower. Financial fragmentation and the lack of credit growth, together with the unsettling lack of inflationary pressures, gave the ECB to the excuse to keep rates on hold for as long as necessary.

Increasing evidence that the UK economy is clambering back to its feet perhaps acknowledges that previous monetary policy actions have worked. It was, therefore, no surprise that new Bank of England governor Mark Carney chose to keep his powder dry for now.

Updated at 5.44pm BST

4.28pm BST

Our correspondent in Rome, Lizzy Davies, flags up that the Berlusconi verdict may come once the Italian stock market has closed, in a few minutes time….

4.07pm BST

We’re still waiting for news from Italy’s supreme court, where judges have retired to considering Silvio Berlusconi’s final appeal against his tax fraud conviction.

Deliberations began at noon local time (11am BST), and were expected to take several hours.
Reuters has a good preview here, which explains how Italian politics could be plunged into chaos if the conviction is upheld:

Italy’s top court to issue verdict on Berlusconi fraud appeal

If you’re new to the case, here are the reasons the case has political ramifications, and could raise tensions across the euro area:

1) Berlusconi faces a sentence of four years in jail – commuted to one year under a 2006 amnesty – and a five-year ban from public office, although the prosecution has now suggested cutting that to three years
2) If upheld, the sentence would need to be rubber-stamped by the Senate
3) That could destabilise the coalition, made up of Berlusconi’s right-leaning People of Freedom (PDL) party, and the left-wing Democratic Party (PD).
4) The Senate might not hold such a vote until September, which could hold back the pace of economic reforms in Italy.

3.29pm BST

Booming US factory sector sends shares soaring

The US stock market is roaring to new record high this afternoon, after new factory data showed that America’s manufacturing sector posted impressive growth last month.

The ISM measure of manufacturing activity in the world’s largest economy jumped to 55.4, up from June’s 50.9. That’s the highest level since August 2011, and well into ‘growth’ territory (50.0 or above).
This pushed shares up on Wall Street, and in the City. The S&P 500 index blasted over the 1,700 point mark for the first time, while in London the FTSE 100 is up 52 points at 6673.

The news also hit US government bond prices. A stronger US economy means more chance of the Federal Reserve pullina back its bond-buying stimulus programme, so Treasuries are being sold off with gusto.

This has pushed the yield (interest rate) on a US 10-year bond to 2.666%, from 2.58% last night. 

Updated at 3.29pm BST

3.09pm BST

See Mario Draghi’s statement

Mario Draghi’s opening statement at the ECB press conference is now online:

It concluded with another reminder to eurozone national governments to cut borrowing and reform their economies. Only then, Draghi argued, can Europe’s youth unemployment crisis be solved:

As regards fiscal policies, in order to bring debt ratios back on a downward path, euro area countries should not unravel their efforts to reduce government budget deficits. The emphasis should be on growth-friendly fiscal strategies which have a medium-term perspective and combine improving the quality and efficiency of public services with minimising distortionary effects of taxation.

To reinforce the overall impact of such a strategy, Member States must step up the implementation of the necessary structural reforms so as to foster competitiveness, growth and job creation. Removing rigidities in the labour market, lowering the administrative burden and strengthening competition in product markets will particularly support small and medium-sized enterprises.

These structural reform measures are essential to bring down the currently high level of unemployment, in particular among the younger citizens of the euro area.

2.37pm BST

And that’s the end of the press conference. Not the most thrilling one ever, and no mention of the situation in Cyprus:

Just off to a meeting — will gather more reaction when I get back…

2.34pm BST

Final question, and it’s about the possibility of releasing European Central Bank minutes. Might this help mend the idea that the ECB and the Bundesbank are at war, and might it end the (entertaining) practice of Council members trying to get their message out through the media?
All this would be nice things to achieve, but it would be highly premature to comment on the specifics, Draghi replies.

2.33pm BST

Key event

Draghi must be looking forward to the beach – he jokes that he can’t take all the credit for restoring confidence to the eurozone area.

Much of this was due to government action, he modestly points out.

2.31pm BST

Follow-up question: Did eurozone countries take advantage of the relief created a year ago by the ECB’s promise to buy unlimited quantities of bonds?
Draghi replies that some countries "certainly did, some of them make progress…" Others, less so.
He declines to give any views on Italy’s progress, but cites Greece, Ireland & Portugal where labour market reforms and fiscal consolidation have taken place.

2.24pm BST

Draghi: One year since THAT speech

Next question: Would Mario Draghi like to reflect on the changes over the last 12 months since he delivered his ‘whatever it takes’ speech in London?
Draghi grabs the ball and runs with it.
There are three key areas of progress, he says. The return of normalisation in the financial markets, some some progress in fighting fragmentation in the credit markets, and thirdly the beginning of capital inflows into the euro area.

He adds:

More generally, OMT [Draghi's bond-buying programme] has reduced the riskiness, the general riskiness, in the euro area.

So, borrowing costs are down, and confidence is up, and finally there are signs that the real economy is feeling the benefits.
The ECB priority now is to repair the monetary policy transmission channels so that stimulus reaches the right parts of the economy, Draghi adds.

Updated at 2.27pm BST

2.18pm BST

Lots of chatter about exactly how, and why, the ECB might start releasing minutes of its meeting.
Jamie McGeever of Reuters sums it up:

While the FT’s Peter Spiegel’s heard quite enough:

2.14pm BST

Draghi: I see no deflation

Question: Is there a risk of deflation in the euro area?
Draghi says no:

We see relative price adjustments in certain sectors, where there is a waning of one-off effects such as taxation.
We don’t see deflation for any country at this point in time.

Updated at 2.15pm BST

2.07pm BST

Just to clarify, the ECB board will present a plan for releasing minutes from its meetings later this year

2.05pm BST

Draghi appears to be in good spirits:

2.03pm BST

Question: How unanimous was the decision, really?
Draghi insists that he’s not refusing to say whether some Council members wanted to cut rates. Apparently it wasn’t talked about.
"We actually only discussed forward guidance…and the decision was unanimous."

And while Draghi repeated his forward guidance today, he might not do it every month:
We may not repeat them if we think you, and the markets, understand that guidance remains the same until it is changed, the ECB president says, adding:
"We don’t change our mind until we change our mind".

2.01pm BST

Question: Why is the ECB considering releasing minutes from the monthly meetings now, when tensions over the eurozone crisis are higher then they were in the early days of the Bank? Isn’t it riskier?
Draghi agrees that the challenge is to make more information available, without threatening the independence of those on the Council.

1.57pm BST

Question: Minutes to be released?

Next questions: Did the ECB discuss tying its forward guidance to a specific target?
And did the ECB discuss release publishing the minutes of its meetings?
Draghi says no, there was no discussion of setting specific targets. Except that the guidance is, as he explained, based within the ECB’s view on inflation, or price stability.
And on the minutes?
We don’t start from scratch here, Draghi says, All central banks have changed their communications.
You’re probably too young to remember, he flatters (or patronises) the Frankfurt press pack, but the ECB was a pioneer in publishing forecasts. Other banks have followed us, he says, with initiatives such as press conferences after monetary policy meetings.
Draghi then says he is keen to see more information from the governing council meetings released.
But it’s vital that nothing is released that threatens the independence of the members of the governing council, who come from 17 countries but are acting in the interest of the eurozone, he adds.

1.50pm BST

The next questioner asks for more clarity on whether the decision to leave interest rates unchanged was unanimous. And gets no clarity all.
Draghi also rejects the suggestion that the ECB has failed to improve credit availability in the euro area.
We did compress volatility, and had some success on lowering short-term rates, he adds.

1.48pm BST

The first journalist gets two questions in:
1) Did the ECB discuss cutting rates and was the decision unanimous?
2) Is the ECB planning to refine its guidance on forward guidance?
Draghi responds:

"We have basically unanimously confirmed the forward guidance from last time"

He then argues that the statement was unanimously supported, by the governing council, and the decision to leave rates unchanged is part of the statement. Hmmm….

And how long will the ECB maintain its accommodative stance? As long as we think inflation pressure remains subdued, Draghi adds.

Updated at 1.48pm BST

1.45pm BST

No excitement after the statement:

1.42pm BST

Onto the questions….

1.42pm BST

A few more key points from Mario Draghi’s statement (which will be online very soon)
1) Europe’s labour market remains weak and needs to be reformed to boost competition
2) The eurozone’s credit market is too fragmented – thus the need for banking union to strengthen weaker institutions in
3) Governments must not deviate from focusing on cutting deficits, but should develop ‘growth friendly’ strategies

1.37pm BST

Downside risks…

Draghi explains that the ECB still expects a "tentative" recovery in the second half of 2013.
However, the risks to economic outlook to the euro area continue to be on the downside. He cites three threats
1) Volatility in the financial markets
2) weaker than expected domestic demand, and
3) slow progress on structural reforms.

1.35pm BST

Forward guidance repeated

Mario Draghi reiterates last months’ unprecedented forward guidance on borrowing costs:
The governing council confirms that it expects borrowing costs to remain at current or lower levels for an ‘extended period of time", he says.

Draghi cited the weak eurozone economy, and "subdued monetary dynamics".

1.32pm BST

And we’re off…
Mario Draghi is reading out the ECB’s statement, explaining why rates were left unchanged.
Underlying price pressures in the eurozone are likely to remain subdued in the eurozone, and inflation expectations are ‘firmly anchored’.
At the same time, recent confidence indicators show signs of improvement from low levels and "tentatively" confirm signs of recovery, he says.

1.30pm BST

ECB press conference begins

Over in Frankfurt, the ECB press conference is about to begin. It’s being streamed live here.

Updated at 1.30pm BST

1.22pm BST

The European Central Bank’s governing council was under no real pressure to ease monetary policy further today, explained Rabobank economist Elwin de Groot to Reuters.
Here’s a flavour:

That was in line with expectations," Rabobank economist Elwin de Groot said of the decision to leave rates unchanged, almost universally expected in a Reuters poll.

"At this stage, we’ve seen several indicators improving a little bit. Today, the update on the PMI surveys confirmed that point," he said of closely watched business surveys, which showed that last month euro zone manufacturing grew for the first time in two years.

Full details here from 9.08am:

Unemployment in the 17-country bloc sharing the euro fell for the first time in more than two years in June.But lending to firms is still declining in the euro zone and is especially weak across the bloc’s troubled debtor countries, which could keep calls for lower policy rates alive."There was no immediate pressure for the ECB to do more," de Groot said, but added: "There is a lot of uncertainty and if the economic recovery does not become more visible in the second half, they will be forced to do more."

12.54pm BST

The European Central Bank’s ‘no change’ decision means:

• The headline borrowing rate, or ‘refinancing rate’, remains at 0.5%

• The ‘deposit facility rate’, paid to commercial banks who leave cash with the ECB, remains at 0.0%

• The ‘marginal lending rate’, charged to banks when they borrow from the ECB, remains at 1.0%.

12.45pm BST

ECB decision

Here comes the European Central Bank… and it’s also voted to leave its key interest rates unchanged.

12.33pm BST

Can the ECB provide more fireworks when it publishes its own decision at 12.45pm BST? Probably not. Lorcan Roche Kelly, chief Europe strategist at Trend Macrolytics, jokily predicts a repeat of last month’s ‘no change’:

Updated at 12.34pm BST

12.25pm BST

Bank of England leaves rates unchanged – What the analysts say

A quick round-up of analyst reaction to the Bank of England’s decision (from 12.00pm onwards)

Lee Hopley, chief economist at EEF:

Recent data suggesting the recovery may now have some legs will have supported another no change decision this month. While the economy has moved in a more positive direction it’s unlikely that there will be major change to the Committee’s medium term view on inflation and growth in next week’s Inflation report. The main event from the MPC will now be more detail on its forward guidance plans alongside the Inflation report, which will frame the debate on monetary policy in the months ahead.

David Kern, chief economist at the British Chambers of Commerce:

Minutes from the recent MPC meeting suggest that QE is unlikely to be increased any time soon and low interest rates will be maintained for a long period, which will provide a stable environment for businesses.

This is a positive shift in emphasis – and we hope this will be confirmed when the MPC presents its response to the Chancellor on how forward guidance should be used, expected next week. When looking at the tradeoff between growth and inflation, we hope the Committee accepts that under current circumstances, more inflation is likely to damage growth. We continue to urge the MPC to consider new policy measures to help boost business lending. For example, the existing QE programme could be used to purchase private sector assets other than gilts, including securitized SME loans, as this would reduce the risk when banks are looking to lend to business.

Howard Archer of IHS Global Insight:

The Bank of England was always unlikely to act at the August MPC meeting given next Wednesday’s assessment on adopting a policy of forward guidance. Furthermore, the ongoing stream of improved news on the UK economy – evident again in the healthy manufacturing purchasing managers survey for July – suggests that the economy is not in need of any further stimulus for now at least.

 However, the improved news on the UK economy could be seen as highlighting the need for the Bank of England to make it absolutely clear that interest rates are not going to go up for some considerable time to come – so is supportive to the case for adopting forward guidance on monetary policy. While the economic recovery seems to be becoming more firmly entrenched, it is from a very low base and with fiscal policy tight, there remains a very strong case for keeping interest rates at 0.50% for a long time to come.

Vicky Redwood of Capital Economics:

Today’s Monetary Policy Committee (MPC) meeting was always looking likely to be a non-event ahead of the announcement about forward guidance due next week. Our best guess is that the MPC will commit to keep official interest rates low until an unemployment threshold is breached.

Updated at 12.25pm BST

12.11pm BST

It’s all about next week

City economists say they aren’t surprised that the Bank of England has voted to leave interest rates unchanged, and not to create more electronic money to buy government bonds.

They believe next week’s Quarterly Inflation Forecast meeting will see the real fireworks, as governor Mark Carney is likely to flesh out the Bank’s ‘forward guidance’ on future policy.

Updated at 12.28pm BST

12.10pm BST

Pound climbs higher

Sterling is gaining against the US dollar, now up a whole cent this morning at .523, following the news that the Bank of England had not cut interest rates further, increased its bond-buying programme, or released a statement.

Updated at 12.12pm BST

12.00pm BST

Bank of England leaves rates and QE unchanged

The Bank of England has voted to leave interest rates unchanged from their current record low of 0.5%, and also left its quantitative easing (bond-buying) programme as it stands.

And there’s no statement.

Recent encouraging economic data, such as this morning’s jump in manufacturing activity, must have encouraged the MPC to wait.

Reaction to follow

Updated at 12.04pm BST

11.50am BST

Just 10 minutes until the Bank of England releases its decision on monetary policy, and economists aren’t expecting a shock.

Ishaq Siddiqi, market strategist at ETX Capital, reckons the Monetary Policy Committee will sit tight:

For the BOE, growth in the UK with an uptick in most measures of economic activity build a greater excuse for Mark Carney and co to refrain from using QE as a tool to stimulate the economy.

While Shaun Richards points out that the BoE’s quarterly inflation report is due out next week:

Updated at 11.56am BST

11.21am BST

Italian political expert Alberto Nardelli has updated his blogpost on the Berlusconi appeal, explaining the various possibilities, and the pressures that a guilty verdict would put on the country’s coalition.

Silvio Berlusconi Mediaset verdict – possible scenarios

11.13am BST

Mario Draghi could produce a little surprise today and announce that the ECB Governing Council will start publishing the minutes of its monthly meetings.

Jens Weidmann, Germany’s man at the ECB, has thrown his weight behind the idea (more details on CNBC), which would improve transparency and bring it into line with the Bank of England and the Fed.

Fast FT has drawn up a few more key points to watch out for:

  • Will Mr Draghi renew or clarify his pledge to keep interest rates "at present or lower levels for an extended period of time?"
  • If he does clarify the time frame for that policy guidance, for how long?
  • Will Mr Draghi be more specific about future action; inflation remains "well-anchored" in the argot, will there be any hints as to what might trigger a further cut?

More on fastFT.

Updated at 11.16am BST

11.00am BST

Economics editor Larry Elliott has written about today’s encouraging manufacturing data:

UK manufacturing confidence highest since 2011

10.57am BST

Italy’s Supreme Court has convened to consider its ruling on Silvio Berlusconi’s tax fraud appeal.

The hearing began on Tuesday, and the judges’ decision isn’t expected until this evening, perhaps at 4pm or 5pm BST.

Updated at 10.57am BST

10.51am BST

Europe’s financial markets have rallied again today, on the back of this morning’s decent manufacturing data – and the cautious tone of the Federal Reserve last night.

In London, Lloyds is leading the way after returning to profit (see full story here).

• FTSE 100: up 30 points at 6651, + 0.45%

• German DAX: up 101 points at 8377, +1.2%

• French CAC: up 18 points at 4011, +0.47%

• Spanish IBEX: up 51 points at 8,464, + 0.6%

• Italian FTSE MIB: up 211 points at 16,694, +1.2%

Rachel Underhill, client manager at CMC Markets, commented that the stock market bulls have "regained control after strong PMI data gives cause for optimism."

10.31am BST

Ninety minutes to go until we get the Bank of England’s rate decision meeting, and 3 hours until the European Central Bank’s press conference. Here’s RanSquawk’s preview of the two meetings:

• Bank of England decision: noon BST

• ECB decision: 12.45pm BST

• ECB press conference: 1.30pm BST

Updated at 10.34am BST

10.26am BST

Over in Greece, public hospital workers began a four-hour strike at 11am local time (9am BST), and were also planning an anti-austerity demonstration.

Kathimerini reports:

The protesters were due to gather outside the Health Ministry at 11.30 a.m.

The workers oppose plans to transfer some 1,500 healthcare workers and turn at least six hospitals in Attica into health centers.

10.18am BST

John Hooper: Rajoy’s high-risk strategy over slush fund claims

Our Southern Europe editor, John Hooper, has been watching events unfold in the Spanish Parliament where prime minister Mariano Rajoy denied wrongdoing over the illegal payments scandal (highlights from 8.43am). Here’s his early analysis:

Rajoy’s strategy today was a high-risk one. But he had little alternative if he was not to resign.

He insisted his only mistake was to have been taken in by Luis Bárcenas — a “criminal” he called him. As a Basque nationalist lawmaker was quick to point out, though, that makes Rajoy a prisoner of what else has yet to emerge from the scandal – whether ferreted out by the young judge conducting the investigation or volunteered by Bárcenas, who has been drip-feeding his disclosures to an eager press.

 With an overall majority in parliament – Rajoy’s People’s Party has 186 of the 350 seats in the lower house, the Congress of Deputies – he can live to fight another day. But the question marks over his survival remain.

 The Spanish prime minister tried to bolster his position by pointing to signs of recovery, notably a drop in unemployment in the second quarter. But the economy has been in and out of recession for the last five years and remains worryingly dependent on other countries, both for exports and tourist receipts.

 Arguably, the best news for the prime minister came in the form of today’s improved manufacturing output figures from Britain and the Eurozone.

Updated at 10.20am BST

10.10am BST

Bit late, sorry, but the Spanish parliamentary hearing over the illegal payments scandal is being streamed online – click here to see it (no translation though).

10.05am BST

The pound has jumped on the back of today’s strong manufacturing data, up three-quarters of a cent against the US dollar to just above .52.

9.37am BST

UK ‘March of the Makers is underway’

Britain’s manufacturing revival has started at last. So argues David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, following the news that activity hit a 28-month high last month (see 9.33am).

Noble commented:

The much vaunted march of the makers has finally materialised.

Exports have been critical to this success, but it is the broad based nature of the sector’s performance which endorses the view we are on track for solid and accelerated growth in the coming months.

The ability of British manufacturers to market themselves abroad was always seen as crucial to long-term success and so it has proved. New export business has grown at its quickest rate in two years in a sign that macro-economic conditions are improving. Domestic performance has also been strong.

Markit’s data is online here:

It shows that confidence among factories is high, with jobs growth at a two-year peak.

Updated at 9.38am BST

9.33am BST

UK manufacturing activity beats forecasts

Britain’s manufacturers have also posted strong growth in July, according to Markit’s monthly survey of the sector.

Hot on the heels of the decent eurozone data (9.08am), the UK PMI index jumped to 54.6 –the strongest reading in 28-months, and well over the 50 point mark that shows growth.

Economists had expected a reading of 52.8.

This must bolster hopes that the UK’s economic recovery continued in July, following the 0.6% increase in GDP recorded in the previous three months.

9.26am BST

Rajoy: I won’t resign over corruption claims

Back in the Spanish parliament, prime minister Mariano Rajoy continues to deliver a lengthy speech defending himself over the slush fund scandal (see 8.43am onwards).

Rajoy has told MPs that he will not step down, and pledged to keep implementing his economic reform programme:

Nothing related to this affair has stopped me or will stop me from governing.

9.20am BST

Lloyds selloff moves closer

In the City, the big news is that Lloyds Banking Group has posted a profit, which will help the UK government sell off its 38% stake in the bank.

And Lloyds’ army of long-suffering shareholders will be interested to hear that the bank has begun talks over resuming its dividend.

My colleague Jill Treanor writes:

The 39%-government-owned bank reported first half profits of £2.1bn – compared with a £456m loss this time a year ago – even though it took an extra £500m charge for mis-selling payment protection insurance, taking the total cost of paying redress to customers to £7.3bn.

The return to profitability had been expected and the City was awaiting guidance on the bank’s future plans to pay dividends – blocked by Brussels when the bank was bailed out in 2008 – which is expected to make the shares easier for George Osborne to sell off. The shares were the biggest risers in the FTSE 100 in early trading, gaining 5% to over 71p.

Lloyds sell-off moves nearer as bank returns to profit

Updated at 9.44am BST

9.11am BST

Graph: Eurozone manufacturing returns to grow

And here’s the graph showing how eurozone manufacturing activity has revived after several dire years:

Updated at 9.12am BST

9.08am BST

Eurozone manufacturing sector returns to growth

Good news. The eurozone manufacturing sector has returned to growth, according to the final survey of the sector carried out by data firm Markit.

Markit’s manufacturing PMI survey (based on interviews by purchasing managers across the euro area) came in at 50.3, beating a ‘flash’ estimate of 50.1. That’s the best reading in two years, and means activity increased (50.0 = the cutoff point between growth and contraction).

Within the data, Germany’s manufacturing sector posted its strongest PMI reading in 18 months, and Italy also cheered analysts with a reading of 50.4.

And there’s even a better result in Greece, where the PMI was its least weak in more than three and a half years.

Rob Dobson, senior economist at Markit said the eurozone’s manufacturing sector had made a positive start to the third quarter of 2013:

Manufacturing output rose again in Germany, Italy, the Netherlands and Ireland during July, while there were welcome returns to growth for France and Austria. The breadth of the expansion will hopefully aid in its sustainability. Even the downturn in Greece showed signs of easing, while Spain saw its second-weakest contraction for over two years.

The bugbear of eurozone manufacturing remains its lacklustre labour market, which contributes to the persistent joblessness of the region as a whole.

Even here there were tentative signs of recovery, with the rate of manufacturing job losses easing to a one-and-a-half year low. Meanwhile, falling commodity prices and intense competition are still keeping inflationary pressures in the sector at bay and posing no real issues for policymakers.

8.53am BST

Rajoy: Justice must do its job

Mariano Rajoy also told MPs in the Madrid parliament that justice must take its course, over disgraced former treasurer Luis Barcenas. The Spanish PM added that he’s confident the courts will decide that neither he, nor his party, committed any crime.And here’s the key quote:

I was mistaken in trusting the wrong person. I didn’t cover up a guilty person. He tricked me, but it was easy because I don’t jump at condemning anyone.

MPs will question Rajoy on the affair once he’s completed his speech.

Updated at 8.53am BST

8.43am BST

Rajoy: Slush fund scandal has hurt Spain

Spanish prime minister Mariano Rajoy has begun testifying in the Madrid parliament over the illegal payments scandal, and admitted that the revelations of corruption and secret payments has hurt Spain’s image abroad.
The embattled PM insisted that claims his party received millions of euros in secret illegal payments are untrue, saying he had ‘made a mistake’ in his relationship with the party treasurer Luis Barcenas.
Barcenas is at the heart of the scandal, and faces a string of charges including money laundering, bribery, and tax fraud.
Here are the first Reuters newswire snaps from the court:



We’ll have more details and analysis later…

Updated at 8.43am BST

8.32am BST

Today’s meetings come after the US Federal Reserve got the ball rolling with its own meeting yesterday.

The Fed left its stimulus package unchanged, and warned that the US economy still faces difficulties. My colleague Heidi Moore explains:

The unemployment rate "remains elevated," members said, while mortgage rates are rising and a deadlocked Congress holding up budget policy is "restraining economic growth."

The committee’s wary tone on the economy is in marked contrast to its more chipper pronouncements just last month, when chairman Ben Bernanke said "generally speaking, financial conditions are improving" and "the fundamentals look a little better to us," crediting the housing sector in particular for creating construction jobs and supporting consumer spending.

Here’s the full story: Fed to keep interest rates at zero amid debate over future leadership

Updated at 8.32am BST

8.22am BST

Poll: Economists expect no change from the ECB

Reuters polled 70 economists ahead of today’s European Central bank meeting, and 69 of them said they don’t expect an interest rate cut today.

However, the ECB governing council could still discuss easing monetary policy.

Last month it surprised the City, and sent the euro tumbling, by declaring that rates would remain at their current record lows, or lower, for an extended period of time. Surely the Frankfurt press pack will ask Mario Draghi to clarify this forward guidance?….

Updated at 8.23am BST

8.10am BST

Central Banks in focus

Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets and the global economy.

It’s a big day for monetary policy, as the European Central Bank and the Bank of England hold their monthly meetings to set interest rates and stimulus packages.

Despite recent encouraging data suggesting the recession is ending, the ECB is expected to remain dovish. And as ever, Mario Draghi’s press conference will be a highlight. What will the man who promised a year ago to do ‘whatever it takes’ make of the situation today?

The Bank of England is also expected to keep its hands off the levers of monetary policy — analysts don’t expect any increases in its bond-buying programme ahead of next week’s quarterly inflation report. But with new boy Mark Carney in the governor’s chair, there’s a frisson of excitement. Will the BOE release another statement, as it surprisingly did last month after Carney’s first Monetary Policy Committee?

There’s also the prospect of drama in the political sphere. After two days of legal argument, Italy’s Supreme Court is expected to give its final verdict on Silvio Berluconi’s appeal against a jail sentence and public office ban for tax fraud. If the sentence is upheld, the Italian coalition government could look shakier.

While in Spain, prime minister Mariano Rajoy is appearing in parliament to answer questions over the illegal payments scandal. MPs will demand answers over allegations that Rajoy himself received money through a secret scheme in which cash from businesspeople was funneled to senior party figures. More details here.

Also, new manufacturing data for the eurozone, UK and US should show how the world economy fared in July.

I’ll be tracking the action through the day…

Updated at 8.22am BST

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