BS: Pound Stays Lower Versus Euro After Bank of England Holds Rates
Aug. 5 (Bloomberg) -- The pound stayed lower against the euro after the Bank of England kept interest rates on hold as forecast by all 59 economists in a Bloomberg survey.
The central bank also maintained its asset purchase program at 200 billion pounds ($318 billion) as predicted by all but one of 34 economists surveyed by Bloomberg. Alan Clarke, an economist at BNP Paribas SA in London, forecast an increase in so-called quantitative easing to 225 billion pounds.
“The Bank’s decision comes as no surprise to the market,” said Adam Cole, head of global foreign-exchange strategy at Royal Bank of Canada in London. “Most of the interest now will be on the minutes rather than the outcome itself.”
Bank of England policy makers are starting to split on monetary policy as an economic recovery stokes concern that inflation may accelerate. While Andrew Sentance argues it’s time to raise the benchmark rate from a record low of 0.5 percent, David Miles told lawmakers last month that the central bank should be prepared to step up its bond-purchase program to safeguard growth if necessary.
The U.K. currency depreciated 0.3 percent to 83.1 pence per euro as of 12:02 p.m. in London. It reached 82.55 pence on Aug. 2, the strongest since July 5. The pound climbed 0.2 percent to $1.914. It dropped earlier to $1.5820. Sterling rose to $1.5969 on Aug.3, the highest level since Feb. 3.
The British currency slipped 0.1 percent to $1.5168 against the dollar when the central bank held rates at its last meeting on July 8, a position it has maintained since March 2009.
There may be a “considerable” way to go before U.K. interest rates return to “normal,” BOE Governor Mervyn King said on July 28.
--Editors: David Clarke, Peter Branton.
To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net Keith Jenkins in London at Kjenkins3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
