GBP/JPY recovers from 183.00 as BoE maintains status quo straight for second time

The GBP/JPY pair discovers an intermediate support near 183.00 after correcting from two-day high. The cross finds a cushion as the Bank of England (BoE) has kept interest rates unchanged at 5.25% for the second time in a row.

Investors were hoping that the BoE would keep interest rates steady as the United Kingdom economy is going through a vulnerable phase. Weak consumer spending, labor demand, and business activities must have leaned BoE policymakers toward supporting a stable interest rate policy. The steady monetary policy was taken after 6-3 vote split in which Jonathan Haskel, Megan Greene and Katherine Mann voted for a 25 basis points (bps) rate hike.

BoE Governor Andrew Bailey, in his monetary policy statement, said that interest rates will remain elevated for a longer period and further interest rate hikes would be appropriate if needed. He further added that the central bank is making good progress in bringing down inflation to 2%.

The inflation forecast report from the BoE shows that inflation will come down to 4.6% by the end of 2023. This indicates that the promise of halving inflation to 5.4% made by UK Prime Minister Rishi Suank in January at time when inflation was at 10.7% would be fulfilled.

On the Japanese Yen front, the Bank of Japan (BoJ) is expected to continue to maintain an expansionary monetary policy but will focus on exiting from a decade-long easy policy sometime next year, as reported by Reuters. The BoJ is committed to keep inflation comfortably above 2% and it should be supported by wage growth.