Pound v USA dollar: BoE rate decision prompts GBP to plunge

  • Pound v USA dollar: BoE rate decision prompts GBP to plunge

Pound v USA dollar: BoE rate decision prompts GBP to plunge

An interest rate rise would have helped to strengthen the Pound, but in the event it slipped back from $1.3617 before the decision to trade at $1.3500 at the time of writing (recovering from a low of $1.3471).

The Pound to US Dollar (GBP/USD) exchange rate has started to recover today, following a sharp drop when the Bank of England (BoE) froze United Kingdom interest rates.

The BoE also left the Bank Rate unchanged at 0.5 percent, with only two out of nine rate-setting Monetary Policy Committee (MPC) members voted for a rise, with the two minority-view members being external appointees Ian McCafferty and Michael Saunders, with the BoE's six staff all voting for no rise.

Mr Carney was Bullish about the economy, suggesting that the: "underlying pace of growth remains more resilient than the headline data suggests".

This was partly due to Governor Mark Carney being cast as the "unreliable boyfriend" by critics. In an April 18 poll, 69 of 76 had a 25 basis point increase penciled in.

It's the Bank of England (BOE), I speak of.

"Furthermore, the Bank was relatively sanguine on the softer wage growth to date emphasizing the continued erosion in slack, which will lift inflation in the forecast horizon".

The Bank's Monetary Policy Committee (MPC) met as scheduled, but made a decision to keep monetary policy settings unchanged.

Besides making financial markets more volatile, the uncertainty on the path of interest rates can complicate planning for companies and households that have to decide, for example, when to take out a loan or repay debt.

The Bank of England (BoE) has downgraded its predictions for inflation and economic growth in Q2, as the prospects for the United Kingdom economy remain "clouded by Brexit uncertainty".

Carney said data looked "mixed" and hinted at MPC disagreements.

However, it noted "regular pay growth has picked up, broadly as expected three months ago, and there are continuing signs that domestic inflationary pressures are building gradually".

The BoE predicted that consumer price inflation (CPI) would continue to fall, approaching the target figure of 2 percent.

Sterling has tumbled in recent weeks from its post-Brexit vote highs of close to $1.44 to $1.35, erasing its gains against the dollar for the year as investors unwound bets on a rate increase and British economic data came in worse than expected.

Minutes to the meeting show the majority of rate-setters preferred to wait to raise rates to "discern whether the softness in the first quarter might persist". In the year to March, annual consumer price inflation was 2.5 percent, well below the bank's projection of nearly 3 percent. Similarly, the core inflation rate slowed to a one-year low of 2.3% from 2.4% in February.