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” TheLFB-Forex.com Trade Desk said.
TheLFB-Forex.com 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 existence. Additionally, the bank decided to expand the asset buying program by another £50 billion to a total of £125 billion
TheLFB-Forex.com Trade Team views the current interest rate of 0.50% the lowest level the BoE will cut. At 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. The bank also noted that the pace of global contraction has started to moderate
Forex Technical Reaction: The pound plunged 90 pips following the news releases, erasing gains made during the European trading session. Against the euro, the pound lost 60 pips today.