GBP Supported After Mixed BOE Rate Comments
GBP to USD has been trading in a range between 2 moving averages in February as Bank of England remains neutral regarding interest rates, keeping GBP/USD stable. Today BOE officials made an appearance, commenting on the economy and inflation, but kept the same narrative, which gave the GBP a boost, sending it to the top of the range.
BOE Governor Bailey Keeping the Balanced Position
In parliament, Bank of England Governor Andrew Bailey mentioned that interest rates can be reduced before inflation returns to the 2% level that the BOE is aiming for. However, he emphasized the importance of seeking longer-term progress in addressing the more enduring components of inflation. Additionally, Bailey noted indications that pay growth is slowing down in line with decreasing headline inflation.
This means that the Bank of England’s current policy stance of maintaining interest rates at their current level remains unchanged basically, with governor Andrew Bailey attempting presenting a narrative that justifies this decision. However, he highlighted that there may be significant caveats in the latest UK employment market report that could challenge the current narrative. He added that t’s essential to analyze the data and understand the broader economic context to fully assess the implications for monetary policy decisions.
Regarding the economy’s full employment, Bailey remarked that it is positive news. However, he highlighted the need for cautiousness when it comes to monetary policy decisions. Bailey also pointed out that while positive employment news is noteworthy, the attention given to the UK recession has been more prominent.
BOE Deputy Gov. Broadbent Giving the GBP A Boost
Ben Broadbent, the deputy governor of the Bank of England also made some comments, stating that he disagrees with the notion that there is overwhelming evidence to support rate decreases, which supported the GBP. He pointed out that inflation in wages and services is double what is needed for sustainable Consumer Price Index (CPI) growth. However, Broadbent expressed confidence that salary growth will slow down significantly in the coming months. He attributed the expected decline in pay growth to falling headline inflation.
GBP/USD Live Chart
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