The Bank of England yesterday announced that rates will remain unchanged at 0.25%, and that the vote had been 8-1. The Pound strengthened against major currencies, as the minutes showed that outgoing policymaker Kristin Forbes had voted for an interest-rate increase to 0.5 percent. Forbes, who is leaving the MPC at the end of June, said inflation was rising fast enough and was likely to remain above the Bank’s 2% target for at least three years, and also felt that growth is likely to be supported by net exports in the future. Consensus among members has shifted to a rate hike and investors are now pricing in an 80 percent chance that this will happen by September 2018, compared with about 60 percent the day before.
At this stage, the BOE is trying to balance predicting the extent to which Britain’s vote to leave the European Union could hurt the economy, and for how much longer it can expect faster inflation.
Markets reacted positively to the results of the elections in the Netherlands, where the current Dutch Minister Mark Rutte won the most seats, sweeping aside the challenge of anti-EU Geert Wilders. The euro recovered some lost ground, finding further support in the form of the Eurozone’s final inflation figures for February. Eurozone inflation year on year showed a figure of 2%. Focus for investors now turns to elections coming up in France and Germany.
All Day – G20 Meetings
14:00 – USD : Prelim UoM Consumer Sentiment, expected at 97.1 against a previous of 96.3