Finance

Sterling falls as Bank of England keeps rates on hold

Sterling falls as Bank of England keeps rates on hold”

In April, Carney sent sterling downwards when he suggested the Bank of England would not rush into a rates hike due to mixed economic messages.

"We think that momentum in the economy is going to reassert", Carney said.

Recent data also showed United Kingdom inflation unexpectedly slowed in March to 2.5 percent - the lowest level in a year.

In early afternoon London trading, the pound was 0.3 percent lower at $1.3511.

"Markets have interpreted today's decision and Inflation Report as moderately dovish - in our view, this reaction seems somewhat overdone", said Dean Turner, U.K. economist at UBS Wealth Management.

Many experts blame uncertainty around Brexit for the slowdown.

Carney was consistently forced to defend the BOE's communication strategy since February's meeting, a period which marked something of a roller-coaster ride for investors.

"The MPC continues to judge that the United Kingdom economy has a very limited degree of slack", the minutes said, noting that hiring intentions had remained strong and the jobless rate had continued to fall despite the sluggish growth in the first quarter of 2018.

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Traders said its latest update showed a disappointing guidance, while Jefferies analysts highlighted that the company missed on the opportunity of announcing a bolder mover of fiber roll out while the 13,000 job cuts were bigger then expected.

The outlook for the interest rate path in the United Kingdom after May Inflation Report from the Bank of England sees even lower than 90 percent chance for the bank to move in November.

- Dan Hanson, Bloomberg Economics.

While the bank left rates on hold, it reiterated once again that it is prepared to raise rates in the near future, saying that an "ongoing tightening of monetary policy" will be necessary in future.

However, it remains stubbornly above the BoE's government-set target level of 2.0 percent.

There was bad news, however, for 2018, with the bank saying that it expects growth of just 1.4% in the United Kingdom this year, compared to 1.8% at its previous forecast. In the MPC's central projection, therefore, a small margin of excess demand still emerges by early 2020, feeding through into higher rates of pay growth and domestic cost pressures.

"Today's figures support previous estimates showing the economy was very sluggish in the first quarter of 2018, with little impact overall from the bad weather". For 2019 and 2020, it predicted GDP growth would pick up to 1.7 per cent, down from 1.8 per cent in its February forecasts. The vote split was the same as at the last meeting in March.

The Bank of England had upgraded its growth forecasts and in March two members of the MPC broke ranks and voted for an immediate rate rise. Still, their colleagues opted not to rush. It particularly affected construction, Carney said.



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