Sterling Falls After Interest Rates Remained at Low Level

The Great Britain pound fell today after the central bank’s policy makers kept the interest rates at the low level, despite the concerns that the inflation may accelerate.
The pound was rising the last month on the outlook that the budget cuts wouldn’t cripple the Britain’s economy. The outlook became less optimistic after the Bank of England left the benchmark rate at 0.5 percent.
As Neil Mellor, the currency strategist at the Bank of New York Mellon Corp., pointed out:

The bank fears deflation and is prepared to take risks with inflation to thwart that threat. That means interest rates stay low for an extended period, and undermines the recent support we’ve seen in sterling.

The division of the policy makers’ opinions on the necessity of the raising interest rates makes hard to predict future moves of the sterling. Some policy makers are already voting for the increase of the rates as they think that the inflation is actually the greater and more real threat. The inflation has exceeded the target of 2 percent so far.
GBP/USD fell to 1.5858 from 1.5879 as of 16:01 GMT, while GBP/JPY traded near 136.09 after opening at 137.00

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