Carney keeps the pound pressured

Carney keeps the pound pressured”

The British pound dropped to this year's lowest point against the euro yesterday in reaction to the Bank of England cutting its forecast for the United Kingdom economy as it left interest rates unchanged.

The Bank of England's Monetary Policy Committee (MPC) has voted to hold the base rate at 0.25%.

Currency investors on Thursday immediately interpreted the Bank of England's decision and commentary as dovish.

That sent the pound 0.8% lower against the dollar at $1.312.

Mr Alan Clarke, a rate strategist with Scotiabank, said: "The door is still open to a hike, but it does not look imminent".

Speaking today at the Bank, Carney said: "Any agreement that reduces access to aspects of our largest trading partner is likely to reduce the level of economic activity in this country".

Jake Trask, FX research director at OFX, added:"Sterling tanked as the BoE chose to hold interest rates". He does not provide a more hawkish statement than the meeting minutes and the QIR.

Last time around three members of the committee voted for a rate rise, this is now down to two, following the departure of Kristin Forbes.

Uncertainty about the economic prospects as Brexit negotiations unfold was a major reason.

But it said the economy would first hit a "trough" this year, with growth of 1.7% before rising to 1.9% next year.

Households have seen their spending power come under sustained pressure from lacklustre wage growth and higher inflation, leading to an expansion of credit and a decline in savings.

"The perception of a hawkish bent to the MPC's thinking since June's meeting was brought to a halt by the Committee's latest deliberations", said Martin Beck, lead United Kingdom economist at Oxford Economics, in a note.

The uncertainties are also affecting Bank policy, according to Yael Selfin, chief economist at accountant KPMG.

Badiani said the MPC would at this critical stage be wary of a policy mistake which would give a negative jolt to the declining rate of British GDP growth.

Speaking about the 10th anniversary since the start of the global financial crisis in August 2007, Carney added that central banks and regulators could not relax the rules that were put in place.

In addition, inflation forecasts have been adjusted with expectations of CPI reaching 2.7% in the third quarter of this year, up from 2.6% predicted in May. "It acts like a dove", he said in a Guardian post. Craig Erlam, senior market analyst at Oanda, said the bank has done little to clear things up, which is also suggested by the market response.

"Although the split in decision has dropped back to 6-2 in favour of a hold from 5-3, the fact remains that weaker growth and higher inflation will continue to put the squeeze on household budgeting".

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