THE TAKEAWAY: BoE leaves official bank rate and asset purchase target unchanged -> FLS scheme and higher inflation deter further stimulus -> Sterling trading unchanged
It was no surprise for British Pound traders that the Bank of England left their stimulus efforts as is. Following the BoE’s meeting, the official bank rate was kept at 0.50% and the asset purchase target remained at 375 billion for the fourth straight month.
By November’s meeting, the bank is expected to have finished spending the extra 50 billion Pounds of stimulus that they voted to add in July, which could increase the chance of the bank choosing to add stimulus. The BoE said today that they will keep the quantitative easing program under review.
The central bank has also said recently that they are still measuring the effects of the recently implemented funding for lending scheme. Also, the UK’s annual inflation rate was reported at 2.5% in August, which is only slightly above the 3-year low, but still higher than the BoE’s 2% inflation target. Higher inflation or a rebound in economic output could deter future action by the central bank.
The as-expected BoE announcement did not have significant effect on Pound trading, as GBPUSD continues to trade slightly above the key 1.6100 figure. Resistance could be provided by the key 1.6200 figure.
GBPUSD 15-minute: October 4, 2012
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