Two central banks stand still, and both look nervously outward

Holds on both sides of the Atlantic

The Bank of England left its base rate at 3.75% on Thursday, and the language around the decision did most of the work. Rate-setters warned that inflation would rise later this year, and the committee was divided over whether the next move should be a hike rather than a cut. Governor Andrew Bailey kept the door open to a rise if the conflict in the Middle East escalates, and the Bank said it stood ready to act if the Iran war pushed energy prices higher.

The Guardian framed it plainly: only the Middle East crisis is preventing a drop in UK interest rates. Chief economist Huw Pill's warnings drew particular attention, with Alex Brummer in This is Money arguing they should not be ignored. City A.M. reported the hold alongside an explicit warning of rises to come.

A day earlier, the Federal Reserve had done much the same. It left rates on hold as officials split over how to tackle inflation, a division This is Money described as a family fight. The BBC quoted the Fed chair saying there was no magic wand for high prices. US second-quarter growth slowed to a 1.5% annual rate, with June core inflation running at 3.3%.

Warsh and the bond market

Attention in the United States settled on Kevin Warsh. His posture on interest rates sparked market inflation fears, according to the Wall Street Journal, though by Thursday markets sensed a degree of dovishness in his remarks and Treasury yields were mixed. On the day of the decision itself, yields and the dollar had fallen on what was read as a hawkish hold.

The WSJ put it bluntly in a later piece: Warsh's honeymoon with the bond market is already over. CNBC set out what a divided Fed means for investors, with the committee pulling in different directions on the path ahead.

Gold slipped as markets digested the Fed decision. In Tokyo, the Nikkei rose 2.7%, led by electronics and bank stocks.

Earnings do the heavy lifting

Away from the central banks, company results set the tone. Microsoft posted a record profit and its shares surged around 10%, driving the Nasdaq higher, while Meta disappointed. US stocks rallied after the Microsoft numbers. Apple and Amazon both reported rising revenues, though investors turned on some tech names, and the BBC drew three lessons about artificial intelligence from the season's Big Tech earnings.

In London the picture was mixed but generally firm. Rolls-Royce shares rose as the firm revealed a profit boost from data centres and defence spending. UK defence firms more broadly reported stronger profits as governments increase military budgets. Greggs shares soared on bumper profits, helped along by iced matcha teas and chicken rolls through a hot summer.

Shell launched a bumper buyback after earnings more than doubled, a result City A.M. tied directly to Middle East turmoil. This is Money reported the fury that followed, with the doubling of profits set against misery for motorists and bill payers facing higher energy costs.

The same conflict that lifted Shell's earnings is the one keeping the Bank of England's finger near the trigger. That is the awkward symmetry running through the week's news.

Around the edges

The House of Lords warned that high interest rates and low confidence are putting construction firms under pressure, a reminder of where the base rate lands once it leaves the headlines. The BBC set out what the rate decision means for mortgage holders.

In Hong Kong, Zhongji Innolight had a rocky market debut, its shares falling amid a global AI sell-off that briefly cut across the optimism seen in the Microsoft numbers.

Elsewhere, Andy Burnham set out plans to free mayors from what he called the Treasury's death grip through new devolved powers over income tax and business rates. And Amanda Staveley, the former Newcastle backer, was reported to be eyeing a stake in West Ham United held by David Gold's family.