GBP/USD Tumbles After Bank of England Leaves UK Interest Rate Unchanged

GBP price, Bank of England news and analysis:

• The Bank of England’s monetary policy committee has kept UK Bank Rate at 0.10% rather than increasing it to 0.25% as had been expected by the markets.
• As the 15bps increase had already been fully priced in, the decision sent GBP/USD sharply lower.

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GBP/USD falls after Bank of England leaves Bank Rate unchanged

GBP/USD is falling back steeply after the Bank of England’ monetary policy committee left UK Bank Rate at 0.1% rather than increasing it by 15 basis points to 0.25%, as had been fully priced in by the markets. MPC members were split on the decision, voting 7-2 in favor, with the two dissenters wanting a hike.

In polls by the Reuters and Bloomberg news agencies, analysts asked for their opinions had been split between those expecting no change and those predicting a rate rise as the UK economy recovers strongly from the pandemic-induced downturn, lifting inflation with it. The vote was 6-3 in favor of leaving the Bank’s quantitative easing program at £895 billion.

At the same time, the BoE published the meeting minutes and its quarterly Monetary Policy Report showing that a rate rise will be necessary over the coming months if jobs and inflation continue on their current courses. Inflation is forecast to peak at 5% next April, before falling back, and UK growth has been downgraded.

GBP/USD Price Chart, Five-Minute Timeframe (November 4, 2021)

Source: IG (You can click on it for a larger image)

Now, the focus for GBP traders will be the Bank’s news conference at 1230 GMT, where its Governor Andrew Bailey will explain why it did not tighten monetary policy and answer questions from the press.

— Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex