BoE meeting was enclosing a surprise. Even though they kept interest rates on hold, three of the eight committee members voted for a rate hike, sending sterling severely higher. U.S. dollar continues its upward rebound after Fed meeting, despite the downbeat data released yesterday.
BoE on Hold with 37% of Committee Back a Rate Hike
Bank Bank of England kept its interest rates on hold at 0.25% as expected, at its policy meeting on Thursday, however, they still surprised the market with the voting pattern. Three of the BoE’s policymakers supported a rate hike. The 5-3 vote by the rate-setting committee was the closest for a rate hike since 2007 arising from the biggest inflation rate in almost four years at 2.9%, above BoE’s 2% target. The publication of the votes appreciated the sterling against all its counterparts during yesterday’s trading session.
The inflation is rising quicker than expected and adds pressure to the committee for tightening the monetary policy to curb it. The “driving force” of the recent pick up in the consumer prices is the sharp depreciation of the British pound’s value followed by the Brexit vote in last June. The committee said that inflation could exceed 3% in the next quarters but the five members, who voted to leave rates on hold, considered the recent slowdown in GDP and consumer spending. The policymakers had different views, however, all agreed that any rate increases ahead would be expected to be gradual and to limited extent...
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