As expected, on Thursday (June 24) yesterday afternoon, the BoE maintain the interest rates at 0.1% which was the lowest level in history. It can be seen from the data released.
The BoE's monetary policy meeting committee (MPC) produced an 8:1 vote. The aim is to keep the current bond-buying programme at around 875 billion pounds which is maintained by the government.
A 9:0 vote was voted on to ensure the low rate, as well as a 20 billion pound corporate bond-buying programme. The UK's central bank predicts that the inflation to break through 3% as the economy reopens after the lockdown.
However, inflation which is 2% higher than the target is considered only temporary, so most policymakers prefer to keep the stimulus going. The BoE said global economic growth was slightly stronger than last may's expectations.
The Projection made by MPC
Therefore, in the future the MPC projects that the UK will also experience a strengthening of GDP and Inflation. That may be happened for a moment and will fall again later.
Commenting on the UK's monetary policy, Paul Dales of Capital Economics compared it to the Fed's monetary policy. The BoE's assessment of UK inflation is similar to the Fed's assessment of US inflation.
The difference is, the UK is not frontally turning into a more hawkish like the Federal Reserve. It is still unsure that they (the BoE) are thinking of tightening monetary policy sooner, just like the Fed.
People expect that the (UK's) monetary will tighten. It is probably much later than mid-2022, which is the time the market previously assumed. Meanwhile, Pound is now weakening.
Pound is Weakening to Euro
The pound weakened against the Euro, with EUR/GBP rising half a percent to 0.8592. It was Sterling's weakest level against the Euro since early April. Meanwhile, GBP/USD fell 0.47% to 1.3896.
It was failing to continue the rally since the previous three sessions. The GBP's response to MPC policy this time around is generally appropriate due to certain conditions occurred.
That is although it is clear that the central bank's discussions are taking it more seriously on the issue of inflationary boost. The US dollar index (DXY) moved in a narrow range below 92.00 in trading this Thursday.
After being disappointed with the Fed Chairman's dovish testimony yesterday, market participants are now looking forward to the release of the final United States GDP data.
The Central Bank Needs more Reasons
It is especially for the first quarter of 2021, as well as the personal consumption expenditure (PCE) report for the period may 2021. A Statement From Jerome Powell is highlighted.
On Wednesday, the Fed Chairman Jerome Powell said that the current rise in inflation alone was not enough of a reason for the central bank to change policy. They need more than that.
He considers the increase in prices is now a reasonable consequence of the reopening of the economy from the COVID-19 pandemic. The rate of inflation will later weaken again by itself.
Elsewhere, the Two Federal Reserve officials expressed more cautious support for the dovish view. So many representatives agree that the inflation is just a temporary situation.
The Attention is now for the core PCE price Index
The people also feel that the high rate of inflation will take longer to fade than many currently forecast. Market participants will continue to monitor the speeches of other Fed officials.
It is as well as a number of recent U.S. economic data releases. Six officials from that organization have scheduled speeches today, including the New York Fed President John Williams.
Meanwhile, the release of the PCE report on Friday could have a high impact due to its function as a reference to inflation. The attention is now fot the core PCE price Index.
That measures the percentage of the product and service price change in the individual consumer level. The consensus predicted that it will be increasing by 0.6 percent month-over-moth.
