Bank of England Keeps Base Rate unaffected at 0.50%
Bank of England kept its benchmark rate unchanged at 0.50% amid weak economic growth and bleak economic outlook.
The Bank of England kept the base rate (at 0.50%) as well as the asset purchase target (at GBP200bn) unchanged, as expected by almost all forecasters in the market. The decision should not come as a surprise as economic data have been very disappointing lately, but with CPI still being twice as high as the BoE's 2% target, some current and former MPC members taking a hawkish stance and the May Inflation Report being released next week, one could not be 100% sure of the outcome. After all, a 25bp hike was fully priced some two months ago and one could argue that rates at emergency levels are not required anymore even though the economy is flat lining rather than expanding at a healthy pace as should be expected after a deep recession and subsequent monetary stimulus.
The Governor recently nailed his dovish stance further by saying that high debt levels pose “massive” economic challenges that would be exacerbated by higher long-term interest rates and that “the economic consequences would become more severe if rates were to rise”. This effectively means that rates can never rise to previous levels again.
I think GBP will do better than EUR so shorting EUR/GBP looks like like good investment. GBP/USD is free falling meanwhile