BOE decides to leave interest rate unchanged as market expected

Posted 07 February, 2019

After the regular meeting held on Thursday, the Bank of England, in particular, its Monetary Policy Committee, has reportedly decided to leave the interest rate at 0.75%, which in fact agrees with the market players' forecast.

It did not take much effort to foresee this move of the UK Central Bank, especially given the most recent inflation data for December 2018 with a recorded slowdown to 2.1% (2.3% earlier). As a result, the upward rate revision actually makes no sense when the inflation is sliding. The next week will be marked by the January inflation figures, and it is quite possible that they might show no changes month-on-month, staying at 2.1%.

The BOE has not changed the asset buying either. As the meeting minutes read, the decision not to change the interest rate was carried by acclamation. This means that the chance for an increase in the interest rate in case of steady inflation rate is very small.

The BOE's decision has fueled the decline of the sterling against the US dollar. The rate dropped by some 0.3%. However, the sterling has somewhat restored positions by now reaching some $1.2974.

It should be mentioned that the Central Bank stated that it is ready to resume monetary tightening in case of the smooth divorce process. The UK departure from the EU is slated for March 29.

For now, the UK can record the slowest economic growth over the past 10 years in 2019. At the same time, the regulator hinted that the interest rate revision can be faster expressing expectations the inflation at 2.1% in two years, which will be above the target level of 2%.

Previous forecast

08 February, 2019 16:32

← Global economic situation prevents oil price from strengthening

The price for oil showed another attempt to rise on Thursday but entailed new profit taking in the market. As a result, the quotes fell down to the $60/bbl handle. However, the prices for Brent oil have managed to restore positions by Friday, hitting the $61/bbl handle. Despite the increase, daily decline remained heavy. Oil quotes that have already shown instability face pressure from the macroeconomic signals. The market environment generally remained the same with prevailing uncertainties and fears. As a result, traders stay on pins and needles taking measures to prevent the price rise. In the near term, it is still possible that oil prices may fall down below $61/bbl again.

Global economic situation prevents oil price from strengthening

Next forecast

07 February, 2019 17:56

Euro-area economic figures fail to promote euro uptrend →

The euro rate keeps on steadily declining since the beginning of this week. The euro to US dollar rate is hovering around a two-week bottom of 1.1355 and may even touch the 1.13 handle. The rate downturn accelerated on Thursday driven by a new European Commission outlook. The European Commission downgraded its GDP growth forecast for the Eurozone from 1.9% to 1.3%. Notably, the regulator revised its forecasts for almost all countries in the region with Germany and France affected the most. The euro downtrend is hardly a surprise for the market, especially amid the strong US dollar rate.

Euro-area economic figures fail to promote euro uptrend
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