- Prior 4.50%
- Bank rate vote 7-2-0 vs 9-0-0 expected (Dhingra, Taylor voted to cut by 50 bps while Mann, Pill voted to keep bank rate unchanged at 4.50%)
- There has been substantial progress on disinflation over the past two years
- That progress has allowed the BOE to withdraw gradually some degree of policy restraint
- Bank rate is still in restrictive territory so as to continue to squeeze out persistent inflation pressures
- Progress on disinflation in domestic price and wage pressures is generally continuing
- Decision to cut the bank rate reflects continued progress in disinflation though with risks to inflation remaining in both directions
- A gradual and careful approach to further withdrawal of monetary policy restraint remains appropriate
- Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further
- Full statement
The votes from Mann and Pill were a surprise and that is leading to a kneejerk jump in sterling. GBP/USD is up to 1.3306 now from around 1.3250 before the decision. In terms of communique, there isn’t much change to the statement whatsoever. The BOE maintains that they will continue with a “gradual” and “careful” approach, similar to that in March.
This article was written by Justin Low at www.forexlive.com.
