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BoE Keeps the Asset Purchase Target and Interest Rate on Hold

Benjamin Spier

THE TAKEAWAY: BoE keeps the asset purchase target and interest rate unchanged -> A 25 billion Pound rise to QE was outvoted 6-3 in the past three months -> Pound gains prove temporary

The Bank of England kept the asset purchase target unchanged at 375 billion Pounds and the interest rate unchanged at 0.50%, as was expected by majority of Bloomberg surveyed analysts. The announcement of the unchanged monetary policy gave the Pound a small boost against the US Dollar, as there was a minority expectation for the BoE to raise the asset purchase target.

In April, BoE Governor King and two other Monetary Policy Committee members voted to increase the asset purchase target by 25 billion Pounds for the third month. Inflation was reported an 11-month high of 2.8% in March, well above the central bank’s target 2.0% rate. Higher inflation combined with the 0.3% GDP rise in the UK economy in Q1 may have given majority of the nine MPC members reason to keep the asset purchase target unchanged in May.

The Pound rose about thirty points towards 1.5600 against the US Dollar following the BoE release, but most of those gains were soon erased, as the release met expectations. A two month high may continue to provide resistance at 1.5606.

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GBPUSDDaily: May 9, 2013

BoE_Keeps_the_Asset_Purchase_Target_and_Interest_Rate_on_Hold_body_gbpusd.png, BoE Keeps the Asset Purchase Target and Interest Rate on Hold

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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