Forex - Pound slumps after BoE March minutes show one vote for a rate cut UDPATE |
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Wed, 21 Mar 2007 11:07
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(Updating to add analyst comment, background)LONDON (AFX) - The pound fell sharply after the minutes to the Bank of England's rate-setting meeting earlier this month unexpectedly showed one vote in favour of cutting interest rates.Eight of the nine-member Monetary Policy Committee voted to leave interest rates unchanged at 5.25 pct, while David Blanchflower argued for a quarter point cut. Most in the market had expected a 7-2 vote, with the two newest members, Tim Besley and Andrew Sentance, again voting for a rate hike.Blanchflower felt there was evidence of spare capacity in the labour market, benign wage pressures and softer service sector growth and that inflation may decline faster in the short term than the MPC's central projection.At 9.38 am, the pound fell to 1.9555 against the dollar from 1.9620 just before the minutes were released, while the euro jumped to 0.6802 against the UK currency from 0.6778 previously.'Cable has fallen by more than half-a-cent to lows just shy of 1.9556 on the back of the BoE MPC minutes shock disclosure that the UK base rate was held at 5.25 pct on March 8 by an 8-1 vote,' said Robert Howard at Thomson IFR Markets.The Bank of England has raised interest rates three times since August last year, taking the main repo rate to 5.25 pct, with most in the market expecting a further quarter point rise in the coming months.The pound had risen sharply up until today's release of the minutes, as yesterday's stronger-than-expected UK inflation data suggested that the next rise in interest rates could come sooner rather than later, possibly as early as April. Many in the market had even begun to price in a further cut beyond that.Howard noted that today's minutes now open the door to a three-way vote split at the next meeting on April 4-5.jessica.mortimer@thomson.comjkm/slmCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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Forex - Pound in focus ahead of BoE minutes, GDP data 