BoE left interest rates unchanged

Thursday, Jun 16 2016

Minutes from the Bank of England’s (BoE) policy meeting revealed on Thursday that all nine members of the Monetary Policy Committee (MPC) were in favor of leaving the key interest rate at a record low of 0.5%, while the central bank also warned of further economic damage if the country decided to leave the European Union (EU), known as a Brexit, in the June 23 referendum.The BoE said it was holding the benchmark interest rate at 0.50%, in a widely expected move. The rate has been held at that record-low level since March 2009.

The central bank also said it was to maintain the stock of asset purchases financed by the issuance of central bank reserves at £375 billion. All nine MPC members also were also in favor of this decision. “This shortfall is due predominantly to unusually large drags from energy and food prices, which are expected to attenuate over the next year,” the minutes said. “Core inflation also remains subdued,” the report added. Furthermore, the BoE repeated that the possibility of a Brexit was "the largest immediate risk facing U.K. financial markets, and possibly also global financial markets."

The minutes further referenced recent behavior in the foreign exchange market and warned that "it appears increasingly likely that, were the U.K. to vote to leave the EU, sterling's exchange rate would fall further, perhaps sharply. The MPC will take whatever action is needed, following the outcome of the referendum, to ensure that inflation expectations remain well anchored and inflation returns to the target over the appropriate horizon,” the minutes concluded.

Sterling is currently being traded few points above 1.42 level. Pair is likely to find support around 1.41 handle and resistance above 1.4250 level. Later today, In the US session, CPI, Unemployment Claims and Philly Fed Manufacturing Index figures are scheduled for a release.

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