Currency Analyst since 2010

Bank of England: meeting minutes

GBP/USD spiked to $1.7002, but then slid to the $1.6940 area.

The Bank of England’s June 5 meeting showed that the Monetary Policy Committee voted unanimously in favor of maintaining the interest rate at 0.5% and the program of asset purchases steady at 375B pounds.

The MPC expressed surprise with the low probability of a 2014 rate rise being priced in. They also stressed that “the more gradual the intended rise in bank rate, the earlier it might be necessary to start tightening policy.”

The MPC said that the economic recovery in the UK was gaining momentum and that the strong pound was helping to push down inflation. They added, however, that “the weakness in inflation elsewhere, especially the euro area, contained information about underlying global inflationary pressures that might yet become evident in the United Kingdom.”

The majority of the BoE policymakers saw spare capacity remaining in the range of 1% to 1.5% of GDP in 2014 Q2. They suggested that more slack should be absorbed before an increase in interest rates was warranted. They also said it was difficult to judge how persistent is the slowing in housing market activity and that the issue would be addressed by the Financial Policy Committee this month.

Summary: There were hawkish lines which imply that rates may be raised sooner than later. Still pound isn't jumpimg. The approaching FOMC and the fact that the BoE has already been hawkish in the past week must be the reason.

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