BoE Split Again On Rate; Trims Growth Outlook

Reuters

The Monetary Policy Committee, headed by Governor Mark Carney, voted 6-2 to hold the interest rate at a historic low of 0.25 percent.

Four members of Monetary Policy Committee voted in favour of 0.25 percent rate cut.

The BoE today said the economy will "remain sluggish" as it cut growth forecast in the United Kingdom from 1.9% to 1.7% in 2017.

Shares in Unicredit climbed nearly 5 percent after Italy's largest bank reported forecast-beating profits for the second quarter, while British retailer Next jumped 9 percent after returning to sales growth in its latest quarter.

Reverse repo rate cut by 0.25 percent to 5.75 percent.

In broad terms, the Bank's inflation forecasts remained similar to the last set: the CPI rate is set to rise to close to 3% in the coming months, and will remain above its 2% target all the way through to 2020. The pair was trading at 1.3234 previously, while earlier in the day it hit a fresh near 11-month high of 1.3266.

"Taking the time to review your mortgage is essential, especially as an estimated two million mortgage borrowers in the United Kingdom are on standard variable rates, overpaying an average of £4,900 per year compared to a market leading deal".

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "The UK economy is faltering and consumer purses are under pressure, so it's no surprise the Bank of England has decided not to upset the apple cart by raising interest rates".

Although the dollar strengthened versus the yen, it continued to weaken against the euro with the single currency pair breaking above 1.19 for the first time since 2015.

The Bank of England (BOE) threw cold water on the red-hot Sterling on Thursday.

Brexit uncertainty "weighs on the decisions of businesses and households and holds down both demand and supply", Carney told reporters after the bank released its quarterly review of economic trends. Monetary policy cannot prevent the weaker real incomes likely to accompany the move to new trading arrangements with the European Union, but it can influence how this hit to incomes is distributed between job losses and price rises.

At the other end of the spectrum has been Next (LON:NXT), whose shares have rallied as the blue-chip retailer posted a small rise in in sales for the second quarter of the year and unveiled plans to distribute a special dividend to shareholders.

The decision came just after a report on Thursday showed Britain's dominant services sector recovered slightly last month.

CPI inflation rose to 2.6% in June from 2.3% in March, as expected. Since the June MPC, we have heard hawkish Committee member commentary, with the BoE's chief economist and MPC voting member Haldane talk of his likely support for a shift in monetary policy, BoE Governor Carney take a more hawkish stance, the most hawkish MPC member Kristin Forbes depart and Silvano Tenreyro join the Committee. But markets focused on the Bank's downward revision of its 2017 growth forecasts.

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