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20/06/24
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GBP Lower on BoE Holding Rates
On Thursday, the British pound was lower, and GBP/USD traded at about 1.2683, down 0.29% for the day in the North American session. As expected, the Bank of England kept rates steady at the meeting today.
It was not surprising that the Bank of England kept interest rates unchanged at the meeting today. The BoE held the benchmark rate at 5.25% for the eighth consecutive time. Before the meeting, the money markets had priced in a 95% chance of a hold.
The Monetary Policy Committee voted 7-2 for a hold, and two members voted for a cut of 0.25%. The markets expected this result, and it was a repeat of the vote at the prior meeting in May. Although this is a 16-year high, the central bank is reluctant to reduce rates due to worries over inflation.
The good news is that the inflation rate in May dropped to 2%, the first time in nearly three years that the BoE has met its target of 2%. The BoE was however not so happy about May services inflation, which was still extremely high at 5.7%. Although this was slightly lower than the previous report’s 5.9%, it was higher than the market expectation of 5.5%. The rate statement mentioned that services inflation was still too high.
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