(MENAFN- Daily Forex) Today's policy meeting was the second consecutive meeting that the BoE has stayed on the sidelines, keeping interest rates at their lowest level since February 2023 of England Maintains Bank Rate in Tight 5-4 Decision

The decision to maintain rates was widely expected but the razor-thin 5-4 decision by the Monetary Policy Committee (MPC) was a surprise. The four members who dissented all voted in favor of a quarter-point cut to 3.75%. The markets had expected a 6-3 decision to keep the Bank Rate unchanged Bailey, MPC Cautious on Inflation

The monetary policy statement noted that MPC believed that inflation had peaked at 3.8% and would ease in October and November due to weak growth and a deteriorating labor market. Still, MPC members said they need to see more evidence that inflation“is on track” to fall to the 2% target before they would cut rates. The MPC said it would have to see further progress on disinflation before the next rate cut.

Governor Andrew Bailey echoed this stance in his follow-up press conference, saying that the BoE believes that rates are on a“gradual path downwards” but needs to see evidence that inflation is on track to return to the 2% target before another rate cut. The takeaway from the rate statement and Bailey's remarks is that the BoE is confident that inflation has peaked but risks remain and the Bank needs to see further evidence of disinflation before cutting rates.

The BoE has been lowering rates roughly every three months since August 2024, when rates were at 5.0%. This points to a rate cut in the near-term and the money markets have currently priced in a quarter-point cut in December at about a 60% chance.

The BoE will be looking at more than key economic data ahead of the December meeting. Finance Minister Rachel Reeves releases the Autumn Budget on November 26 and the extent of new tax increases will be an important factor in the BoE's rate decision. A harsh budget will likely raise expectations of a rate cut in December Pound Higher, Stock Market Muted After BoE Decision

The GBP/USD currency pair has pushed higher after today's rate decision and is trading at 1.3095 in the European session, up 0.35% on the day.

The FTSE 100, the benchmark UK stock index, has moved in the opposite direction of the British Pound but the reaction has been muted. The FTSE 100 is currently at 9764 points, down 13 points (0.13%) on the day.

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