UK inflation concerns beat job and economic growth concerns over at the Bank of England..
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| It was a meeting that could have gone in either way today and all-in-all, the best outcome possible was achieved for both consumers and the Pound.
For the first time ever, MPC members failed to reach a majority decision on the bank rate. The first round saw 1-4-4 in the voting with Alan Taylor being the surprisingly sole person to vote for a 50bp rate cut (who later on voted for 25bp which then won majority)
4 members voting to keep interest rates on hold was too a surprise to the market.
The Bank of England report suggests inflation pressures was too high to ignore and the forecast for peak inflation has been raised to 4% next month as opposed to 3.6% before today. This is why 4 members voted to hold rates.
This means the chances of an interest rate cut next month is extremely low and with no meeting in October, this headwind for GBP can be forgotten about for at least 2-months (good news for £).
Lower interest rates are better for consumers right now and as a cut of 0.25% was already priced in, £ wasn't negatively affected.
In fact, because of 4 members voting to hold rates as opposed to just 2, the Pound jumped 0.5% across the board. As highlighted a couple of days ago, sometimes the voting means more than the actual outcome at these events..
As mentioned at the start of the week, GBP usually weakens in the build-up to a Bank of England interest rate decision and this time was no exception. £-€ lost 0.3% from yesterday to just before the vote. Something to be aware of if you are new to the market and in particular these reports. |
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