The sterling pound (GBP) is negotiated defensively against most of the main currencies and government bonds of the United Kingdom at 10 years are having a lower performance than their global peers. Yesterday, the Bank of England (BOE) reduced the monetary policy rate at 25 basic points up to 4.50% (widely expected) and emphasized that there would be ‘a gradual and careful approach’ for future rate reductions. The markets imply an additional reduction of 75 to 100 basic points in the next 12 months, BBH FX analysts point out.
The GBP is negotiated defensively against most of the main currencies
“The MPC voted by a majority of 7–2 to reduce the rates. The two dissident members, the Ultra Dovish Swati Dhingra and surprisingly Dr. Catherine Mann, preferred a reduction of 50 basic points. Dr. Mann was a staunch defender in The MPC, so its change of political position lowers the threshold for more flexibility of the BOE. “
“The BOE minutes highlight that for one of the two members who voted for a reduction of 50 basic points ‘a more activist approach in this meeting would give a clearer signal of the appropriate financial conditions for the United Kingdom.’ Dr. Mann is an open defender of an activist monetary policy strategy. ”
“In the current economic cycle, this strategy implies keeping the waiting rates for longer until there are clear signs that the remaining persistence in inflation dissipates. Once the persistence of inflation has been eliminated, it would be appropriate to make quickly flexible and forcefully.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
