The Bank of England expectedly raised the main interest rate by 0.25%, to 1.00%, from 0.75%. The decision was made in such a ratio of votes 6 to 3. Although during the meeting there was a proposal to immediately raise the rate by 0.50% to 1.25%, justifying this by high inflation, which is at many ten-year highs.
According to the latest data, the consumer price index reached 7% in March, where a significant role was played by the rise in food and energy prices.
The BoE continues to expect inflation to rise to around 10%, also assessing the negative impact of the geopolitical factor – the conflict in Ukraine and the outbreak of COVID-19 in China.
The exchange rate of the British currency reacted negatively to the predicted value of the rate by falling by more than one figure or 100 points.
This dynamic can be explained by two factors. On the one hand, the market has already taken into account the projected rate hike in quotes, and on the other hand, yesterday's 0.50% increase in the cost of borrowing in the United States following the meeting further widened the gap in the ratio of rates between the BoE and the Federal Reserve in favor of the latter. We expect that against this background, the GBPUSD pair may fall to the level of 1.2350.
