GBP/USD: BoE under pressure as inflation cools
While central banks jostle markets, Bank of England faces rate decision amid easing price pressures.
The Bank of England is expected to maintain its benchmark interest rate at 5.25% on Thursday, extending the pause to a fifth consecutive meeting. However, the central bank faces mounting pressure to signal potential rate cuts as inflation continues its downward trajectory.
February's lower-than-expected inflation figures have intensified calls for the BoE to provide clarity on the timing of future rate reductions. Governor Andrew Bailey has previously stated that the Bank would wait for firm evidence of inflation being under control before considering cuts, despite the current gradual decline from October 2022's 40-year high of 11.1%.
Berto Tordecilla
The BoE's careful balancing act aims to curb the soaring pace of price rises without harming the sluggish economy. Its 14 consecutive rate hikes, intended to rein in inflation, have raised borrowing costs for households and the government while offering higher returns for savers.
Any dovish signals from the BoE could weigh on the pound sterling, potentially exacerbating the GBP/USD's decline following a strengthening US dollar this morning. Market volatility has been elevated, with surprise moves by the Bank of Japan and the Swiss National Bank, coupled with the Federal Reserve's reiteration of its plans to cut interest rates this year.
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