Bank keeps rates on hold as fears grow of May hike

GBP  USD price chart

GBP USD price chart

Yesterday, two other members of the Bank's monetary policy committee - Michael Saunders and Ian McCafferty - dissented from their colleagues' decision to hold interest rates at 0.5 per cent in favour of an immediate hike.

Gilt futures initially fell after the BoE announcement but were stronger at 1320 GMT, up almost 80 ticks on the day, roughly in line with German bund futures.

"Developments regarding the United Kingdom's withdrawal from the European Union-and in particular the reaction of households, businesses and asset prices to them-remain the most significant influence on, and source of uncertainty about, the economic outlook", the BOE's rate-setting panel said.

The BoE's decision follows the Federal Reserve's 21 March announcement it would raise USA interest rates by 25bps in Jerome Powell's first meeting as chairman since taking over from Janet Yellen.

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.

By contrast, long-dated gilt prices have been supported in recent weeks due to reduced issuance plans, as Britain's net public borrowing needs have fallen to their lowest since 2002.

The heavy snow and disruption caused by the so-called "Beast from the East" at the end of last month will knock the UK's economic growth, the Bank of England has said.

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LONDON, March 22 (Reuters) - Sterling rose to a seven-week high on Thursday as retail sales beat expectations and traders prepared for a Bank of England meeting at which the central bank is expected to flag a rate rise in May.

The bank increased its base interest rate from 0.25% to 0.5% in November last year, having previously failed to raise rates in more than a decade as a response to the financial crisis. Pay growth continued to pick up.

"In short, a May rate rise remains all but certain, but the market had largely priced it before Thursday", said Ken Odeluga, market analyst at City Index.

Ramsden says the Bank is also investigating ways in which fintech could help to improve regulation, building on existing work internally and in collaboration with the FCA. 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. Last month the Bank of England forecast growth of 1.8% this year and next - well below Britain's historic average - and last week government forecasts were gloomier, with Brexit exerting a drag on the outlook.

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

"We expect no further change after May", HSBC economists Liz Martins and Simon Wells said.

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