The Bank of England (BOE) held on Thursday interest rates at the record low level of 0.25 percent and maintained asset purchases at £435 billion.
The decision, which was made by an 8-1 majority, had been as good as unanimously anticipated by central bank watchers with many expecting the BOE to err on the side of caution until more clarity emerges on the Brexit process and the U.K. economy’s capacity to manage outside of the European Union (EU).
The fact that the sole dissenter, Kristin Forbes, will be leaving the Bank in June 2017 did not deter currency traders from sending sterling immediately higher to trade at around $1.234, having hovered at an average level of around 1.227 for much of the morning.
BOE governor Mark Carney has repeatedly emphasized his rate-setting board’s willingness to ignore a certain level of above-target inflation prompted by the sharp plunge in sterling of around 18 percent since the Brexit vote last June. This came amid arguments from many sides that the current strength of the economy warrants a rate hike.
The resilience of the U.K. economy has defied expectations in recent months with several bouts of stronger-than-anticipated data since last June’s referendum, largely propelled by a seemingly irrepressible consumer. In light of the positive surprises, the government recently revised its forecasts for domestic growth in 2017 sharply higher.
However, cautionary signs have appeared in recent weeks with mounting evidence of a consumer spending slowdown compounded by this week’s data showing a further squeeze on real incomes.
Source: CNBC
