The British Pound (GBP) registers solid losses against the US Dollar (USD) after the Bank of England’s (BoE) decision to hold rates unchanged in a 5-4
vote split, with BoE’s Governor Bailey providing the decisive vote. A slowdown in UK inflation, reported on Wednesday, was the main driver behind BoE’s decision. The GBP/USD is trading at 1.2295 after hitting a daily high of 1.2331.BoE
decided to hold rates unchanged at 5.25% due to the deceleration of inflation, a loosening labor market, and a deterioration in business sentiment. The BoE added that rates would remain high for an extended period and “Further tightening would be needed if evidence of more persistent inflationary pressures.”
Bailey and Co. updated their GDP forecasts, and for the Q3, the economy is expected to grow by 0.1%, below the 0.4% August estimate, underscoring that growth in the year’s second half would be weaker. The BoE would also tweak its quantitative tightening program from £80bn to £100bn. The BoE’s decision hurt the GBP/USD upside prospects, as the pair was already downward pressured after the Federal Reserve decided to hold rates unchanged but revised the interest rates for 2024 upward. In the Summary of Economic Projections , Powell and his colleagues updated the dot plots, with most Fed officials expecting to keep