Pound jumps as BoE hints at rate rise in May

Pound jumps as BoE hints at rate rise in May

Pound jumps as BoE hints at rate rise in May

The U.S. Federal Reserve on Wednesday lifted short-term rates in the U.S. and signaled further increases are expected as the U.S. enjoys a robust expansion. The Committee also voted unanimously to maintain the stock of United Kingdom government bond purchases, financed by the issuance of central bank reserves, at £435 billion.

"Recent snow-related disruption was likely to have a measurable adverse effect on growth in the first quarter, although it was hard to quantify the precise extent of this", the Bank's Monetary Policy Committee (MPC) said.

"The message from the Bank of England to borrowers couldn't really be clearer: get ready for higher rates now", said Ed Monk of fund managers Fidelity International.

Some investors were more equivocal.

- Economists expect three rate rises in 2018 and two in 2019.

The British pound passed $1.42 this afternoon following the Bank of England's decision to keep interest rates on hold, yet with hints of a rise later this year. US President Donald Trump's plans to impose tariffs have sparked concern that a trade war may ensue.

The UK labour market is approaching, if not already at, what the Bank of England describes as full employment.

"With real wage growth moving into positive territory for the first time in over two years, strong retail sales and some welcome progress on the Brexit negotiations, the uncertainty that has concerned the bank in recent months is beginning to be demystified", he said. Economic figures since then, according to Thursday's minutes, were "broadly consistent" with those views.

"It is very hard to read into these minutes any clues that the MPC is trying to downplay a May rate hike", he said.

Earlier this month, Bank of England Governor Mark Carney said crypto-currencies such as bitcoin had failed as a form of money, but he said the technology could improve the financial system in future.

The bank had hiked the rates to 0.5% last November, the first increase in a decade.

"We still think that the MPC will hike interest rates in May", Paul Hollingsworth, senior United Kingdom economist at Capital Economics, said following Thursday's announcement.

The Brexit transitional deal with the European Union adds that little bit of confidence for businesses and citizens alike essentially meaning little will change now until 2021.

The news came as finance minister Philip Hammond said he was committed to helping fintech grow by taking a series of domestic steps and forging links overseas. Pound to South African Rand Exchange Rate Forecast: Risk of GBP/ZAR Exchange Rate Slump on GDP SlowdownThe Pound could make more noticeable losses against the South African Rand in the week ahead, when finalised UK GDP growth rate data for Q4 2017 will be released.

'What the data certainly suggests is that there are pockets of the consumer that are remaining very resilient.

Related news