Chart: BoE Inflation Report Rarely a Nonevent for GBP
February 16, 2011
The Bank of England’s Quarterly Inflation Report is one of the most important pieces of documents released by the central bank. The Inflation Report includes the central bank’s latest growth and inflation forecasts and frequently telegraphs their plans for monetary policy. Although the Monetary Policy Committee has not changed interest rates in nearly 2 years, they getting close to raising rates and because of that, investors are watching their every move.
The publication of the Inflation Report is rarely a nonevent for the GBP/USD. The following chart from Barclays Capital shows the rollercoaster like reaction in the currency pair days after the report is released. With the Bank of England upgrading its inflation forecast and downgrading its growth forecasts, sterling traders are as confused as ever and this confusion could turn into volatility for the British pound. The sell-off in the GBP/USD today indicates that the Quarterly Inflation Report was not nearly as hawkish as investors had hoped but many economists are still looking for the BoE to raise rates this year. In the short term, the less hawkish tone of the report could lead to additional position adjustments in the GBP but in the long term, the GBP is still headed higher because the BoE remains at the verge of raising interest rates. There is no question that the U.K. central bank will tighten before the Federal Reserve.
Posted in 2009 gbpusd forecast, 2011 british pound forecast, Bank of England, British Pound
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February 17th, 2011 at 10:51 pm
I think the central banks will continue with the current rates beyond 2011. BOE propaganda in the UK is that the inflation is temporary. BOE and the government will find much more excuses in the future to keep the interest low/prop the banks/kill the savers/ let the banks buy debt/inflate the stagnant economy which would be depressed otherwise. the same applies I think to the US.
February 22nd, 2011 at 1:59 am
I agree that the BoE will raise interest rates in the near future. I’m not too sure about the Fed yet, but I don’t see how we can raise rates while we still have a war going on.
February 24th, 2011 at 7:24 am
Do you think that the BoE will increase the base rate to more than 1% in 2011?
if so there is there going to another wave of toxic debt!