Bank of England holds rates, British Pound slips

[Redator]

The British pound has posted losses on Thursday. In the North American session, GBP/USD is trading at 1.3551, down 0.54% on the day.

Bank of England maintains rates at 4%

The Bank of England stayed on the sidelines at today's meeting, maintaining interest rates at 4.0%. This followed a quarter-point cut in August. The decision was anticipated by the markets and the British pound is showing limited movement. The 7-2 vote saw two members vote for a quarter-point cut. Last month's decision to lower rates was decided by a 5-4 vote and took an unprecedented two rounds. The split votes reflect dissension within the BoE with regard to the Bank's future monetary policy.

The BoE has been trying to balance rising inflation, which supports holding rates, with the slowdown in the jobs market, which is putting pressure on the central bank to lower rates and ease economic conditions. The BoE cannot ignore inflation, which rose to 3.8% in August, close to double the BoE's target of 2%. Unless inflation slows markedly, the BoE may have to wait until 2026 to lower rates.

Governor Bailey tried to put a positive spin on high inflation, saying he expected it to return to target, but the inflation still remained a threat and future cuts would have to be made "gradually and carefully".

How bad is the employment market? In the minutes of the meeting, the MPC said that its forecast showed employment growth at zero, which it said was partly due to the increase in employer national insurance contributions.

Fed lowers rates for first time since December 2024

Federal Reserve lowers rates

The Federal Reserve lowered rates by a quarter-point on Wednesday. The decision, which was widely expected, was the first rate cut since December 2024.

The rate statement cited the cooling labor market as the main reason behind the rate cut. In his press conference, Fed Chair Powell reiterated his concern about the deteriorating job market and said that the risk of higher and more persistent inflation has eased.

Perhaps the highlight of the meeting was the 'dot plot', which charts the expected rate path of members who participated at the meeting. The dot plot indicated that most members expect two more rate cuts before the end of the year, which means the Fed is in a dovish mood.

GBP/USD Technical

• GBP/USD has pushed below support at 1.3617 and 1.3573 and is testing 1.3552. Below, there is support at 1.3508
• There is resistance at 1.3638 and 1.3682

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