Bank Rate at 0.5% - What Does It Mean?

GBP/USD has been quite a show this week, FXStreet reports.Making new highs today for the month.

Analyst at ING Bank James Knightley explained that the Bank of England voted unanimously to leave Bank Rate at 0.5% and the size of the asset purchase facility at £375bn.

"It is very interesting that the BoE have decided to finally express a view on Brexit with ”Leave” campaigners likely to be up in arms that they have come off the fence. The BoE acknowledge that the Brexit vote has weighed on sterling and may “also delay some spending decisions and depress growth of aggregate demand in the near term”. This is nothing more than stating the obvious, but it could be the first step into what could become a more concerted campaign to highlight the economic risks."

It is said that tuning to next week, analysts at TD Securities explained that after an uneventful Bank of England meeting, they expect an uneventful inflation number this week." Core inflation in February likely repeated January’s 1.2% y/y print, while the headline measure likely remained unchanged at 0.2% y/y. While this is below the Bank of England’s recent 0.5% estimate, the downside miss largely reflects declines in oil prices seen after they completed their forecast".

The Bank of England explained its stance to leave monetary policy unchanged: “Twelve-month inflation rose to 0.3% in January.  Inflation nonetheless remains well below the 2% inflation target.  This is due predominantly to unusually large drags from energy and food prices, which are expected to fade in the coming months.  But core inflation also remains subdued, a consequence of the past appreciation of sterling, weak global inflation and restrained domestic cost growth.”

It added: “Set against that, there appears to be increased uncertainty surrounding the forthcoming referendum on UK membership of the European Union.  That uncertainty is likely to have been a significant driver of the decline in sterling.  It may also delay some spending decisions and depress growth of aggregate demand in the near term.”