GBP to remain supported as the BoE awaits further evidence of disinflation before cutting rates – Commerzbank

Economists at Commerzbank analyze Pound Sterling’s (GBP) outlook after the Bank of England (BoE) shifted towards a more neutral approach to monetary policy as persistent inflation is still a concern. 

BoE hesitates again – and rightly so

The key point was that the BoE made it clear that the conditions for a rate cut will probably not be met for some time. At the press conference, Governor Bailey had to justify the fact that the BoE had not lowered its key interest rate despite the sharp drop in inflation. According to journalists, the public would suffer from high interest rates. However, Bailey correctly explained that the population was also suffering from high inflation, which despite the recent fall was still at 4%, and that it was therefore important to bring inflation back to the 2% target in the long term.

While I often criticized the BoE last year for being too hesitant, its current reluctance to cut rates should be seen in a different, positive light. If it maintains this stance, the Pound should remain supported.