The Pound pushed beyond the 1.21 level against the Euro and 1.65 against the US Dollar after Bank of England Governor Mark Carney outlined a new forward guidance policy and as the Central Bank announced that interest rates would remain at 0.5% for at least another year.
The BoE said that interest rates will remain at record lows even after its previous target of 7% unemployment is met. The Central Bank now predicts that the 7% target will be met in the first quarter of the year.
Carney laid out his new policy which is more complicated than the previous version. The key points are as follows:
- For the first time the Bank will not raise interest rates until the spare capacity in the UK economy has been fully absorbed, which is unlikely to happen until 2015.
- More factors will be considered and not just the unemployment rate. The other factors include the number of hours worked and business surveys.
- The BoE will publish more reports and forecasts.
- The £375 billion bonds bought under the Bank’s quantitative easing programme will be held until the first rate rise.
When interest rates do rise they will rise gradually. Stimulus measures will remain in place for now.
The Pound surged after the Bank revised its growth forecast for 2014. The economy is now expanded to expand by 3.4% over the year, a sharp rise from the previous figure of 2.8%. Sterling is now expected to spend the rest of the session climbing against the majority of its peers as the markets digest the news.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6536 ,
Pound Sterling,,Euro,1.2124 ,
Pound Sterling,,Australian Dollar,1.8265 ,
Pound Sterling,,Canadian Dollar,1.8154 ,
[/table]
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