Bank Of England Official Rate Actual 0.50%, Expected 0.50%, Previous 0.50%

Release Explanation: This is the Interbank overnight lending rate. It sets the tone for mortgages, commercial loans, and all economic lending criteria. “An increase in Interest Rates will have the effect of slowing economic growth. A decrease in Interest Rates is used by a Central Bank to stimulate economic growth. Economic strength can create Inflation, raising Interest Rates is one of the easiest way to contain Inflation” Trade Desk said. Trade Desk Thoughts: The Bank of England kept the Official Rate at 0.50%, as the market expected. In the current monetary easing cycle, the bank has cut 525 basis points, from a high of 5.75% reached in July 2005. The current interest rate of 0.50% is the lowest on record in the bank’s 3 centuries of history. Trade Team views the current interest rate of 0.50% the lowest level the BoE will cut. At the past meetings, the voting members expressed their concerns about moving the interest rate too low, for too long a period. However, it seems that the bank is determined to help the economy, even though it might cause strong inflation in the future.

In the bank’s assessment, the inflationary pressures have moderated over the course of the last few months, as internal and foreign consumption drops and because of strong declines seen in the energy markets. However, upside pressure from the CPI has been added from the sustained depreciation of the pound and from the new fiscal measures to reduce the Value Added Tax (VAT). “The CPI read is still in danger of undershooting the 2% rate”, the bank has added in the release statement.

Forex Technical Reaction: The pound dropped a small amount of pips initially but quickly retraced and is trading unchanged since the announcement. The pair remains above the 100 day simple moving average which has provided strong support recently.