Bank of England holds interest rates at 0.5%

22 June, 2018, 06:10 | Author: Eric Barnett
  • Pound to euro exchange rate Today’s Bank of England’s interest rate decision could send rate plummeting

In response, the probability of an August hike rose from around 33% to almost 46%, judging by market pricing, and that boosted GBP/USD and GBP/JPY while weakening EUR/GBP.

The Bank of England has held interest rate at 0.5% after the Monetary Policy Committee voted 6-3 in favour of no rise on Thursday.

As economic momentum improves, fears over rising inflation grow and pressure increases for interest rates to rise.

'But there was a small element of surprise in the voting, with the Bank's chief economist Andy Haldane joining Michael Saunders and perma-hawk Ian McCafferty in calling for an immediate rate rise.

Should the Bank of England raise rates this summer? The central bank offered a confident stance on wage growth, and despite some tepid macroeconomic figures seen these last couple of month, policymakers believe the economy is rebounding after the weak first quarter.

FILE PHOTO: A pigeon stands in front of the Bank of England in London, Britain, April 9, 2018. Additionally, the MPC reviewed its guidance on the level of Bank Rate at which the MPC will consider unwinding its asset purchase programme, now set at 1.5%, compared to the previous guidance of around 2%.

Ben Brettell, senior economist at Hargreaves Lansdown, said: 'Today's decision was always expected to be one of no change, with even those who think a rate rise is coming focusing on the Bank's August policy meeting as the most likely candidate for an upward move.

"The MPC has repeatedly talked up the chances of rate hikes, only to disappoint when all the data don't fall into place".

Although Mark Carney, the Bank's governor, was among the majority voting for rates to remain at 0.5% this month, the MPC said if the economy were to develop broadly in line with its projections, "an ongoing tightening of monetary policy over the forecast period would be appropriate".

The more positive news is that unemployment is at its lowest since 1975, the BoE says the economy is running near full capacity, retail sales have picked up and the longer-term direction for interest rates over the next two to three years is likely to be up, according to Reuters.



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