GBP price, Bank of England news and analysis:
- The Bank of England’s monetary policy committee has kept UK Bank Rate at 0.10% rather than increasing it to 0.25% as had been expected by the markets.
- As the 15bps increase had already been fully priced in, the decision sent GBP/USD sharply lower.
GBP/USD falls after Bank of England leaves Bank Rate unchanged
GBP/USD is falling back steeply after the Bank of England’ monetary policy committee left UK Bank Rate at 0.1% rather than increasing it by 15 basis points to 0.25%, as had been fully priced in by the markets. MPC members were split on the decision, voting 7-2 for the status quo, with the two dissenters wanting a hike.
In polls by the Reuters and Bloomberg news agencies, analysts asked for their opinions had been split between those expecting no change and those predicting a rate rise as the UK economy recovers strongly from the pandemic-induced downturn, lifting inflation with it. The vote was 6-3 in favor of leaving the Bank’s bond-buying target at £875 billion.
At the same time, the BoE published the meeting minutes and its quarterly Monetary Policy Report showing that a rate rise will be necessary over the coming months if jobs and inflation continue on their current courses. Inflation is forecast to peak at 5% next April, before falling back, and UK growth has been downgraded.
GBP/USD Price Chart, Five-Minute Timeframe (November 4, 2021)
Source: IG (You can click on it for a larger image)
The Bank’s announcement suggests it is currently more concerned about economic growth than inflation, with both its growth forecast cut and its inflation target raised. However, the BoE had hinted strongly that a hike was likely so its decision has already raised questions about its credibility. It was this that led to Andrew Bailey’s predecessor as Bank Governor, Mark Carney, to be labelled the “unreliable boyfriend”.
— Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
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