Pound Outperforms as BoE Holds Interest Rate, Easing Unchanged
The Bank England decided today to keep its monetary policy steady at the end of its 2 day deliberation process, sparking a wave of outperformance in Sterling and invalidating speculation that the central bank would take a more dovish stance.
The June benchmark interest rate will remain unchanged at 0.50%, and the BoE’s quantitative easing target will stay at 325 billion pounds. Although economists did not expect a change today, speculation that the central bank would adopt further accommodative measures had grown recently on news of the worsening political crisis in Europe.
Even so, further easing in the months to come cannot be ruled out. The Bank of England’s most recent monthly inflation report said “the possibility that the substantial challenges within the Euro area will lead to significant economic and financial disruption continues to pose the greatest threat to the UK recovery.”
The British pound spiked on the news that further easing will be delayed for at least a month. The Pound was strong against the Euro and US Dollar directly after the report.
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