Wednesday, October 30, 2013

The British Pound Is Plunging

The British pound just tanked.

This is coming in the wake of the Bank of England's Monetary Policy Committee announcement.

While the MPC is keeping interest rates and its assest purchase plan unchanged -- as expected -- the language appears to signal that the BoE could keep monetary policy loose for longer.

From the statement:

Since the May Inflation Report, market interest rates have risen sharply internationally and asset prices have been volatile.  In the United Kingdom, there have been further signs that a recovery is in train, although it remains weak by historical standards and a degree of slack is expected to persist for some time.  Twelve-month CPI inflation rose to 2.7% in May and is set to rise further in the near term.  Further out, inflation should fall back towards the 2% target as external price pressures fade and a revival in productivity growth curbs domestic cost pressures.

At its meeting today, the Committee noted that the incoming data over the past couple of months had been broadly consistent with the central outlook for output growth and inflation contained in the May Report.  The significant upward movement in market interest rates would, however, weigh on that outlook; in the Committee’s view, the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy.

Here's a look at the British pound, which is down 1.2% against the U.S. dollar:



View the original article here

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