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Pound Surges After BOE Keeps Rates Unchanged But Chief Economist Unexpectedly Backs Rate Hike

Thursday, Jun 21 2018
Pound Surges After BOE Keeps Rates Unchanged But Chief Economist Unexpectedly Backs Rate Hike

While the BOE kept rates unchanged at 0.5% as expected, the market was surprised by both the hawkish undertones of the statement and the surprising addition of Haldane to the list of dissenters (McCafferty and Saunders), which made the decision a 6-3 affair when markets were expected a 7-2 split. The flip by BoE Chief Economist Haldane was surprising due to his recent vote for a hold; as a result, odds of a rate hike in August, when the BOE will publish new estimates, have been sharply boosted, which is in turn reflected in cable, which has surged nearly 100 pips rising above 1.32 in kneejerk reaction.

Adding to the hawkish undertone, the BoE said it now intends not to reduce its balance sheet until Bank Rate reached around 1.50% (the previous guidance around 2.00%), although it added that "in the event that potential movements in Bank Rate are judged insufficient to achieve the inflation target, the reduction in the stock of assets could be amended or reversed".

More in this category: « Oil prices climb higher after bigger-than-expected weekly fall in U.S. crude supplies French service sector drives stronger growth of overall output in June »

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