BREAKING: GBP jumps after in-line BoE decision

Bank of England announced the final monetary policy decision of 2023 today at 12:00 pm GMT. BoE was expected to keep rates unchanged, with the main rate staying at 5.25%. With a rate move highly unlikely, the focus was on guidance for the next year, given that money markets were pricing in over 100 basis points of easing for 2024.

In-line with expectations, interest rates were left unchanged at the previous level. Decision was made with a 6 BoE members voting for keep rates unchanged and 3 BoE members voting to raise it. The 6-3 vote split was also expected by the markets as Greene, Haskel and Mann are known hawks among BoE members.

Bank of England stick to its previous guidance and still thinks there is some way to go before it can announce victory in inflation fight. Also, it was repeated that Bank may need to tighten policy should evidence of more persistent inflation surface. Inflation is expected below 4.50% by the end of 2023, down from 4.75% in November forecast, and at around 4.75% in January 2024 before moving closer to 4.00% in February. It was noted that recent drop in services inflation may not be reflecting underlying trends and that measures of inflation persistence in the United Kingdom are higher than in other major advanced economies.

GBP jumped following the decision as there was no evident dovish shift from BoE. GBPUSD jumped above the resistance zone marked with 78.6% retracement of the downward move launched at the end of November and painted a fresh daily high above 1.2700 mark.