When the Bank first made that short-term inflation forecast last month, it prompted investors to push back into late 2016 and 2017 their expectations of when the Bank was likely to finally start raising rates.
The pound’s initial decline after the meeting’s minutes were published Thursday was short-lived, and Britain’s currency swung between gains and losses versus the USA dollar for much of the afternoon.
South Korea’s central bank left its benchmark interest rate unchanged at a record low of 1.5 per cent for a sixth consecutive month on Thursday, ahead of an anticipated rate increase by the US Federal Reserve.
“Yesterday’s Bank of England minutes did not rock the boat from the November Inflation Report“, he said. If it does keep the rate unchanged, any gain in the kiwi may be limited by the prospects of a Fed hike next week, traders said.
Against the euro, the pound was also down 0.2 percent at 72.305 pence.
Inflation was below zero for the second month during October and recent data on the economy remains mixed giving the BOE some room to maintain its policy setting for the time being, said London analysts.
The only member to vote for a rate rise was Ian McCafferty, one of four external members on the panel. At the same time, policy makers have has tried to avoid the risk of triggering a selloff of Serbian assets by reducing borrowing costs too quickly.
Inflation at the consumer level was expected to rise as drops in the prices for energy and food steadily dropped out of the calculations for the consumer price index, the Bank of England explained in a statement. Societe Generale and Canada’s RBC Capital Markets have both recommended selling sterling in the past week, the French bank predicting the pound may fall as low as $1.30 if voters vote in a referendum to leave the EU. “The trend should be toward at least 6-3 by now”.
United Kingdom government bonds were little changed, paring an earlier advance.
The lowest core PCE forecasts also fell over the same period, particularly for the third and fourth quarters of next year, to 0.9 percent and 1.0 percent, respectively, from 1.4 percent in earlier polls.
“The outlook for inflation reflects the balance between persistent drags from factors such as sterling and world export prices and prospective further increases in domestic cost growth”.
Governor Mark Carney and other Monetary Policy Committee members said the “material news” in the month since they had last met was that oil prices had “fallen markedly again”, which raised the likelihood of inflation staying subdued.