As expected, the Bank of England (BOE) kept interest rates on hold at 5.25% in a 7-2 MPC vote this June.
In their official statement, the BOE acknowledged that annual inflation fell to 2% in May but also noted that CPI is expected to pick up slightly in the second half of the year.
The statement also highlighted “considerable uncertainty” around labor force estimates, making it difficult for the central bank to gauge employment trends. Still, policymakers seemed wary of declining job vacancies which indicated loosening labor market conditions.
Link to official BOE statement & MPC minutes for June 2024
Monetary policy committee members Swati Dhingra and Dave Ramsden once again voted to ease monetary policy but were outnumbered by officials who preferred to sit on their hands for now.
The MPC meeting minutes also revealed that there were some policymakers who judged that risks were “finely balanced” in judging that the return of headline inflation to 2% “was not necessarily indicative of the required sustained return to target.”
Overall, the announcement pointed to the next decision being a “live” one by citing that “as part of the August forecast round, members of the Committee will consider all of the information available and how this affects the assessment that the risks from inflation persistence are receding.”
Market Reactions
British Pound vs. Major Currencies: 5-min
Overlay of GBP vs. Major Currencies Chart by TradingView
Sterling had mostly been moving sideways leading up to the BOE statement, with the exception of GBP/CHF which popped higher during the Swiss National Bank’s (SNB) surprise rate cut announcement.
Although the BOE decided to keep monetary policy unchanged for the time being as expected, sterling still had a bearish reaction to the “dovish hold” announcement, as traders likely turned their attention to rising odds of an August cut.
However, price action among pound pairs became mixed a couple of hours after the BOE event, with GBP/USD and GBP/CAD extending their gradual slide while GBP/JPY pulled slightly higher. The rest of the pairs recouped most of their post-BOE losses then proceeded to cruise mostly sideways during the New York session.
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