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Flash – BoE Minutes, Still Unanimously Hawkish

James Boston
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It has been two weeks since the Bank of England’s Monetary Policy Committee (MPC) voted to keep UK interest rates unchanged following their regular monthly meeting. The minutes of that meeting have just been published and they make for interesting reading.

**The 9 members that make up the MPC again voted in harmony, with all 9 clearly in favor of prolonging the Banks loose monetary stance**.

It has to be noted that these minutes refer to the meeting that took place before two recent key events. Firstly, last weeks publication of the Bank of England’s Forward Guidance report, in which the Bank upgraded the UK’s growth prospects. Secondly, yesterdays surprise Consumer Price Index figure which showed that UK inflation has began falling back from its already low levels.

The Bank of England is traditionally Hawkish on rates where inflation is concerned, more so than usual the current 9 member board under Governor Carney. This would suggest that despite falling unemployment and despite an upgrade to the UK’s GDP target, the Bank of England is now likely to back away from any attempts to tighten monetary policy until at least the end of 2014.

In this regard, the British Pound, which has recently been challenging long term highs, suffered a setback yesterday morning in the immediate aftermath of the publication of the CPI data. The pound had made back a little ground overnight, clambering back into the low 1.67s against the US Dollar, but interestingly forming a very clear triangle pattern on the 5 minute chart, this is always a sign of a battle between bulls and bears that is coming to an impending head, and in this case it is understandable.

Clearly the bears have won out, the market was looking for a sign that at least some of the MPC members would start to look favourably on a rate hike, as this has evidently not occurred GBPUSD has sharply broken lower, currently trading back in the mid 1.66s with little sign of support.

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