The Pound Takes a Hammering as Bank of England Delays Interest Rate Rise, Again
- Basic interest rate unchanged at 0.5%The Bank of England's Monetary Policy Committee (MPC) voted 7-2 to keep interest rates unchanged at 0.5% in their May policy meeting while the Bank's Inflation Report shows in-house economists forecasting inflation to cool faster than previously expected. These downgrades are a signal to markets the Bank won't be raising interest rates as fast as previously expected with question marks now hanging over whether rates will rise in 2018 at all.
In line with the moves, Pound Sterling sold off across the board with the currency easily being the worst-performer of the day. However, ahead of the weekend the Pound is maintaining a 0.4% weekly gain against the Euro, and is just 0.11% lower againt the Dollar, suggesting the event did not deliver the significant hit to Sterling many had feared. Sterling had been rising ahead of the event with markets apparently favouring a positive outcome, we therefore warned the market was in danger of seeing a "buy the rumour, sell the fact" type reaction.
This appears to have been indeed the case, reinforcing the view that the currency has in fact only ever risen on three Bank of England super-Thursday events.
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