The Great Britain pound fell following the Bank of England’s monetary policy meeting. The policy minutes were not particularly hawkish, leading to speculations that British policy makers could be forced to leave interest rates at the record low for a prolonged period.
The Bank of England left interest rates and the asset-purchase program unchanged at today’s gathering. The minutes (unusually, released immediately after the meeting) did not sound very optimistic, saying:
The near-term outlook for CPI inflation appeared slightly weaker than at the time of the August Inflation Report, in part reflecting the further decline in the oil price. CPI inflation was likely to remain close to zero before picking up around the turn of the year. But it now appeared likely to remain below 1% until spring 2016.
As for international developments, the central bank voiced concern about the notable slowdown of emerging economies, Brazil and Russia in particular. At the same time, the BoE was not particularly concerned about the developments in China, noting:
There had so far been few signs of a marked weakening in Chinese activity in the recent data, despite the increased concerns that had led to pronounced falls in Chinese equity prices and associated financial market volatility over the preceding few months.
All in all, the current economic environment does not look suitable for monetary tightening. As a result, the sterling is losing its attractiveness for traders, which has been based for the large part on expectations of policy firming.
GBP/USD declined from the open of 1.5316 to 1.5279 as of 13:17 GMT today following the rally to the daily high of 1.5372. GBP/JPY declined from 183.81 to 183.18. EUR/GBP gained from 0.7334 to 0.7370.
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