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Pound to suffer as rates kept on hold
Published on 10.05.2018 15:16

The British pound has remained surprisingly resilient today after the latest interest rate decision from the bank of England who voted to leave rates on hold at 0.5 percent.

Board members of the BOE voted 7-2 to keep rates unchanged and the following statement regarding inflation gave investors the impression that the central bank would leave rates on hold for the rest of the year with no move now expected until 2019.

According to the BOE, inflation will fall to the bank’s preferred target rate of around 2 percent much faster than earlier predictions so the need to hike rates at this time was not warranted.

They also added that the economy barely grew in the first 3 months of the year, which only added to the case to keep rates the same.

Some analysts believe the BOE were careless in leaving rates on hold for so long as overall, the UK economy has experienced nearly a decade of economic growth since the financial crisis and there was ample chances to hike rates.

The trouble now they say is should the UK economy begin to turn sour because of Brexit negotiations among other things, The BOE will have no room to cut rates from the already record lows which leaves the economy very vulnerable.

"Another poor decision by MPC, keeping interest rates at 0.5pc despite nine years of economic recovery, a buoyant global economy, above target inflation and the lowest unemployment rate for 43 years. A failure of monetary policy strategy and leadership." Said Andrew Sentance, an economist with PwC

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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