Breaking: BoE leaves policy rate unchanged, GBP/USD slumps below 1.2900 on dovish tone

The Bank of England's (BOE) Monetary Policy Committee (MPC) decided to leave the policy rate unchanged at 0.1% at its September policy meeting as expected. Furthermore, the BOE held the Quantitative Easing (QE) program unchanged £745 billion.

Follow our live coverage of the BoE event and the market reaction.

Market reaction

The GBP/USD pair remained relatively calm with the initial market reaction but the dovish tone seen in the policy statement triggered a fresh GBP selloff. As of writing, the pair was down 0.55% on the day at 1.2892.

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GBP/USD dives to fresh session lows, below 1.2900 mark post-BoE.

The GBP/USD pair came under some fresh selling pressure and slipped below the 1.2900 mark, or fresh daily lows post-BoE announcement.

Key takeaways from policy statement as summarized by Reuters

"As  in the August report, there remains a risk of a more persistent period of  elevated unemployment than in the central projection."

"The MPC wil keep  under review the range of actions that could be taken to deliver its objectives."

"MPC does not intend to tighten monetary policy until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably."

"Outlook conditioned on the assumption of an immediate, orderly move to a comprehensive free trade agreement with the European Union on January 1st, 2021."

"The path of growth and inflation will depend on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the UK."

"The MPC's latest central projections were also conditioned on the assumption of an immediate, orderly move to a comprehensive free trade agreement with the European Union on January 1st, 2021."

"Committee had discussed its policy toolkit and the effectiveness of negative policy rates in particular."

"MPC had been briefed on the Bank of England's plans to explore how a negative bank rate could be implemented."

"Effectively, should the outlook for inflation and output warrant it at some point during this period of low equilibrium."

"The sterling exchange rate index has fallen by around 2%, in part reflecting recent Brexit developments."

"CPI inflation is expected to remain below 1% until early 2021, albeit slightly higher than expected at the time of the August report."

"Market contacts had also reported renewed concerns over recent Brexit developments."

"Just under half of the respondents had ranked Brexit as one of the top three sources of uncertainty for their business."

"MPC would consider economic issues relating to Brexit within the context of its wider forecast discussions ahead of the November MPC meeting."

"Indicators of global activity had been broadly in line with the MPC’s expectations."

"For 2020 Q3 as a whole, bank staff expected GDP to be around 7% below its 2019 Q4 level, less weak than had been expected in the August report."

"Consumption had continued to recover during the summer and was now at around its start-of-year level in aggregate, stronger than expected in the August report."

"Unclear for how much longer this strength would persist or to what extent it was due to changes in consumption patterns due to the pandemic."