Bank of England announced a monetary policy decision today at 12:00 pm GMT. Bank decided to increase interest rates by 25 basis points with the main rate increasing to 0.75%. Such a decision was expected by the market by the majority of economists but some hinted at a possibility of a 50 bp move. Decision was not unanimous as there was 1 dissenter who opted to leave rates unchanged.
Bank noted that inflation will be around 8% in Q2 2022 and may climb higher amid the Ukraine-Russia war. Bank noted that tight labour markets and robust domestic price and cost growth made the hike justified today and BoE said that some more modest tightening may be appropriate in the coming months.
GBP took a hit following the decision. Markets seem to have been wanting more - either bigger rate hike orae clear indication of more rate hikes in the future. GBPUSD dropped from around 1.3200 to 1.3130 while EURGBP spiked 0.8400.
EURGBP spiked following BoE decision. The pair fully recovered from a daily drop and is now testing the upper limit of the downward channel. Source: xStation5