Anything lower than 58.0 could put sterling under pressure.
GBP Traders” attention turns to this coming “Super Thursday’ as the Bank of England meeting will be closely watched following a series of comments from MPC members, including Governor Carney, that the first rate hike since the crisis is moving closer. “The exact timing of the first move can not be predicted in advance”. And in an echo of the language of the chair of the US Federal Reserve, Janet Yellen, he added: “In short, it will be data dependent”.
Although many economists were expecting two or three, rather than just one, MPC member to vote for higher rates, this is nonetheless the first meeting with a split vote since December. “But once rates do start to rise, it should be done gradually to allow businesses to absorb costs and plan ahead”.
It followed official data which revealed the UK’s CPI inflation fell back to zero in June.
In its report, it said the outlook for inflation was “muted”.
Commentators now believe it is unlikely there will be an interest rate rise this year, with markets anticipating an increase next February at the earliest.
Further, Broadbent said the recent decline in oil price “delayed any rebound in inflation until early or spring next year”. It also forecast a slow pick-up in inflation thanks to a strong pound.
But he tempered his remarks by saying shocks to the economy and shifts in the exchange rate could affect the timing and size of any increases.
“With inflation still low and global uncertainty around Greece, the Eurozone and China, the bank shouldn’t play it’s rate rise card too soon”.
The Bank thinks growth in the third quarter of the year will come in at 0.7 per cent, and it revised up its estimate for growth over 2015 as a whole from 2.5 to 2.8 per cent. Ian McCafferty was the lone dissenter with some expecting the vote to be closer to 6-3 opposed to today’s 8-1 result. But minority support for a change in policy at the BoE rarely translates rapidly into a shift in the majority’s view.
He said rates would probably rise slowly, reaching a level that is “about half as high as historical averages” of 5%, from its current record low of 0.5% – a level it has remained at since March 2009.
