It’s always a big day when the Bank of England’s Monetary Policy Committee reports, especially when a central bank is staring down the barrel of a deep recession.
Interest rates are expected to stay on 0.10% but an extra £100bn could go onto quantitative easing. That may be priced in already, but movements in the exchange rate are likely if there is discussion about a drop in interest rates next year to negative territory, or more quantitative easing than anticipated.
A further drop in interest rates would be negative for sterling, as would anything more than £100bn of QE.
Yesterday there was little movement during the day and sterling ended up where it started against the euro and half a cent below against the USD.
Inflation data that came out yesterday showed inflation of just 0.5% in the year to May. This was pushed down by the falling price of petrol that month, but it’s widely felt that prices generally, with the possible exception of food, will be cut in an effort to get people spending.
