BOE Analysis: Staying away from the spotlight is pound-positive


  • The Bank of England kept its policy unchanged and made minor tweaks to its statement.
  • The focus returns to Brexit and especially EU-UK negotiations.
  • The BOE's attempt to stay in the shadows is positive for the pound.

Are Bank of England decisions non-events? Not exactly. The Bank of England has left its interest rate unchanged at 0.75% and the Quantitative Easing (QE) at £435 billion in a unanimous vote – everything as expected.

However, the BOE still wishes to raise rates – it has stuck to its hawkish bias – while other central banks are cutting interest rates. The UK decision comes less than 24 hours after the US Federal Reserve cut rates and one week after the European Central Bank cut rates and announced a new bond-buying scheme. 

Moreover, the BOE has reiterated that the response to a no-deal Brexit will not be automatic – rates may not necessarily drop. A fall in the pound may trigger higher inflation and the "Old Lady" may opt for hiking interest rates. 

The BOE marginally downgraded its forecast for third-quarter growth – from 0.3% to 0.2%. On the other hand, it has expressed satisfaction from the tightness of the labor market. Wage growth recently accelerated to 4% year on year.

Brexit remains in the limelight and talks between EU and UK officials about an Irish-only backstop are now in the spotlight. The focus will then return to parliament, then to the EU Council, and later on perhaps to general elections.

Every twist and turn in the saga has a significant impact on the pound. However, among the other factors influencing sterling, the Bank of England's stance remains positive. 

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