Yesterday, the BoE kept interest rates unchanged, but the ultra-hawks McCafferty and Saunders decided to vote for a hike even at this meeting. Elsewhere, safe havens gained, while equity markets tumbled on increased trade tensions between the US and China.
BoE Leaves Rates Untouched; McCafferty and Saunders Dissent
The pound traded lower against most of the other G10 currencies on Thursday. It gained only against SEK and NOK and AUD in that order, while it underperformed the most versus the “safe havens” JPY and CHF, as well as USD.
Yesterday, the BoE decided to keep interest rates unchanged as it was expected. What came as a surprise though, is that the vote was not unanimous. Expectations were for a 9-0 vote on the decision, but the ultra-hawks McCafferty and Saunders decided to vote for a hike even at this meeting, arguing that the slack in the economy has been almost absorbed and that wage growth is accelerating.
As for the summary and the minutes accompanying the decision, officials noted that given the excess demand over the forecast period, an ongoing tightening of monetary policy will be appropriate. That said, they also repeated that future hikes are likely to be at a gradual pace and to a limited extent.
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