Pound surges as BOE policy inaction catches traders off guard

(From Bloomberg)

The pound climbed as the Bank of England kept interest rates unchanged, prompting speculation that the central bank may take a more careful approach in its measures to support the U.K. economy after the nation’s vote to leave the European Union.

A bus passes the Bank of England in London, Britain May 13, 2015. REUTERS/Stefan Wermuth/Files

A bus passes the Bank of England in London, Britain May 13, 2015. REUTERS/Stefan Wermuth/Files

Sterling gained versus all but one of its 16 major peers, touching the highest level versus the dollar in two weeks, as minutes of the BOE meeting showed eight of the nine Monetary Policy Committee members voted to keep the official rate at a record-low 0.5 percent, where it’s been since March 2009. Gertjan Vlieghe was the sole dissenter, saying the outlook justified an immediate reduction and calling for a 25 basis-point cut.

Thirty-one of 54 economists surveyed by Bloomberg predicted a cut, while 23 expected the BOE would keep rates on hold. Futures pricing before the announcement showed the chance of a rate cut at 86 percent, compared with 11 percent on June 23, the day of the nation’s referendum. Read more



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