After a surprise pause in September here, the BOE has gotten away with making their job a little easier in communicating today’s policy decision. The thinking previously was to get one more rate hike in as they could still get away with it. But now that ship has sailed and we’re left staring at another decision where the central bank is to keep its bank rate unchanged at 5.25%.
And with price pressures trending lower as a whole, that is working to their favour in having announced a pause in September. As such, there is no need to change the status quo for now.
There shouldn’t be any surprises as the BOE is likely to reaffirm that rate hikes are doing their job and will take some time to see the full effect. Meanwhile, inflation developments are progressing positively but the road ahead is still a long one. For now, the pressure on the economy is not one that is crushing just yet and so there is no need to poke the bear on that front.
Given an easier walkthrough for the BOE this time around, the pound reaction should be rather muted; all else being equal.
This article was written by Justin Low at www.forexlive.com.
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