As many had anticipated Mark Carney and his team at the bank of England kept rates at a steady 0.25% and left their asset purchase program untouched. The committee voted 7-2 in favour of leaving rates at 0.25%.
With now more necessity to look at rate rises the tone of Bank Of England helped Pound Rates to perform well against the majority of the majors.
With inflation now becoming potentially as troubling as the Brexit induced UK slowdown policymakers are now having their hands forced. Many investors now believe the Bank of England will raise interest rates before the end of the year. November is the likely time.
During the minutes which followed the rate decision, Carney whilst still very concerned with the outlook surrounding Brexit stated that the economy was reacting better than predicted. Stating that Inflation was rising and the committee have also seen promising signs that UK wages could also be on the rise.
The Bank of England envisages next month’s inflation figures to rise again and remain above the target level of 2% for years. The low Pound Rate accelerated inflation with Fuel and household goods all costing more.
Touching on the UK Bond buying stimulus the Bank announced that a reduction in assets purchases would take place in the coming months in order to curb inflation.
The arguably more upbeat tone of The BOE saw Pound rates rise with the GBP performing well over the remainder of the week. The message was reinforced on Friday by Gertjan Vlieghe. Mr. Vlieghe who is considered to be one of the most cautious MPC members claimed during a speech on Friday that
The evolution of the data is increasingly suggesting that we are approaching the moment when Bank Rate may need to rise.
His comments assisted Pound rates to improve on Wednesday’s initial gains.
GBP to Euro has enjoyed solid gains since the vote and accompanying minutes with GBP to Euro moving sharply from 1.1271 to 1.1339. The currency pair has continued to strengthen with GBP to Euro closing on Friday at 1.1373
A currency pair which shows no signs of slowing down is the GBP to USD. The pair continues to break records with the GBP to USD now amongst their highest post Brexit levels sitting at 1.3594. Next week could also see GBP to USD strengthen further with the tension surrounding North Korean showing no signs of stopping. Continuing further diversion from the US Dollar could be inevitable.