Pound Drops as BOE Keeps Key Interest Rate Unchanged

The Great Britain pound slumped today as the Bank of England maintained its benchmark rate unchanged at the record low level of 0.5 percent.

The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate at 0.5 percent as was expected by analysts. The Committee also voted to maintain the stock of asset purchases at £200 billion. The sterling reacted heavily on the decision despite it was expected. Such reaction perhaps means that some traders believed that the rates would be increased.

One of the reasons to anticipate a rates hike could be the inflation, which accelerated to 4 percent in January — two times above the BOE target. Even such inflation hasn’t moved the central bank to change its policy and the bank’s Governor Mervyn King said this month that increasing the rates too soon would be a ”futile gesture”.

GBP/USD tumbled from 1.6200 to 1.6057 as of 17:24 GMT today. Meanwhile, GBP/JPY went down from 134.02 to 133.14.