Sterling continued it ascent as the Bank of England warned that a rate increase could occur within months if the economy performs as expected.
The pound vaulted more than a figure from 1.3160 to 1.3279 in the first five minutes after the statement accompanying the rate decison was released at 7:00 am (EDT). It reached a high of 1.3394 before consolidating slightly lower, trading at 1.3378 at 12:30 pm in New York
The Monetary Policy Committee voted 7-2 to keep the benchmark rate at 0.25 percent as anticipated but a majority of the governors supported the statement that, “some withdrawal of monetary stimulus was likely to be appropriate over the coming months in order to return inflation sustainably to target.”
Since the Brexit vote in June 2016 the BOE has been focused on the risks that separation from the European Union poses for the British economy. In response the bank cut the official bank rate 25 basis points to its current and historic low.
But the U.K. economy has performed better than expected and inflation, aided by the post-Brexit crash in the pound, has risen. The bank now expects consumer inflation to exceed 3 percent next month and to remain above its 2 percent target for several years.
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