FX.co ★ Pound Holds Firm as BoE Strikes Cautious Tone, Diverging From Fed Easing

The British pound maintained its strength, trading above $1.36 and reaching its highest level since early July. This occurred following the Bank of England's decision to keep interest rates steady and its cautious outlook on future policy. The central bank held the Bank Rate at 4%, cautioning that there are still significant upside risks to medium-term inflation. The policymakers emphasized that monetary policy is flexible and not predetermined, with any adjustments to the rate depending on the pace at which underlying disinflationary forces diminish. This careful approach contrasts with the more accommodative stance of the US Federal Reserve. On Wednesday, the Fed enacted a widely anticipated 25 basis point rate cut and indicated a further 50 basis points of reductions by the end of the year. However, Fed Chair Jerome Powell described this move as a "risk management" adjustment, rather than the start of a new easing cycle.