BoE’s decision to keep interest rates at their current record low of 0.25% wasn’t all that surprising yesterday, especially given the recent performance of the UK economy. However, the meeting minutes showed that a rate hike could occur sooner than previously thought.
Traders piled into sterling as a result and it strengthened to yet another one-year high against the US dollar. Governor Carney later gave a television interview in which he said there was a very real possibility that rates would have rise soon in the future. The response was immediate as sterling made further gains, but what is fascinating about all of this is that it could just be a sentiment made to produce a desired effect; sterling has strengthened despite BoE not actually doing anything.
It’s a bizarre situation to find ourselves in and the plot really has thickened. Inflation continues to outpace wage growth and the UK’s recent economic data releases haven’t exactly been brilliant. You have to whether this Carney’s interview is ‘hot air’, or whether he actually means what he says. We’ll no doubt see in the future.
After an extremely busy week for UK economic data releases, today is a welcome period of respite. The markets will be looking to key pieces of data from the US as well as potential fallout from the BoE meeting yesterday.