Following the Bank of England’s decision yesterday to raise the UK’s interest rate to 0.5%, the pound strengthened against the euro initially, but then plummeted.
This was due to a mixture of euro strength and a ‘dovish’ press conference from Bank of England governor Andrew Bailey. He said that the outlook remains uncertain and said that the economy is not “roaring away”, so it would be a mistake to expected that interest rates are on the “inevitable long march up”.
Despite this, the minutes of the meeting were more ‘hawkish’, with members of the Monetary Policy Committee voting by a majority of to increase Bank Rate by 0.25% – those members in the minority wanted to increase the rate by 0.5%. The Bank also forecasted that inflation would stay high in the medium-term and that the tightening of monetary policy will proceed.
