Sterling on the up after Bank holds rates at 0.75%


Sterling on the up after Bank holds rates at 0.75%… but growth forecast for this year is cut from 1.2% to 0.8%

The pound surged against the dollar and the euro after the Bank of England froze interest rates at 0.75 per cent.

Sterling rose above $1.31 and towards €1.19 after the monetary policy committee voted 7-2 in favour of leaving rates unchanged.

But currency traders said sterling started to rise up to 15 seconds before the announcement – raising fears that the decision had somehow leaked. 

Sterling rose above $1.31 and towards ¿1.19 after the monetary policy committee voted 7-2 in favour of leaving rates unchanged

Sterling rose above $1.31 and towards €1.19 after the monetary policy committee voted 7-2 in favour of leaving rates unchanged

Last month the Bank admitted that a third party contractor had accessed private audio feeds of market-sensitive press conferences.

The decision to hold rates was the last to be presided over by governor Mark Carney, who highlighted encouraging signs for the economy in early 2020.

But he added: ‘To be clear, these are still early days, and it is less of a case of so far so good than so far, good enough.’

The Bank cut its forecast for economic growth for this year from 1.2 per cent to 0.8 per cent. 

Growth is expected to pick up to 1.4 per cent in 2021, down from previous projections of 1.8 per cent, and 1.7 per cent in 2022, down from 2 per cent.

Traders had been expecting the decision to come down to the wire as weak economic data since last November’s rate-setting meeting were countered by signs that the global economy was stabilising. 

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And business surveys conducted following last month’s Tory win in the General Election indicated that UK firms were becoming more confident in the country’s prospects.

But data from exchange company CME showed there remains a 60 per cent chance the Bank will cut rates this year, meaning Carney’s successor Andrew Bailey could have an eventful first few months in the job after he takes over in March.

Antoine Lesne, of investment firm State Street, said: ‘The recent improvement in economic sentiment post the December election meant it was not felt necessary to press ahead with an insurance cut.’

 



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