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Bank of England unanimous on interest rates

The Bank of England has released the minutes of MPC meeting held on 8 and 9 April 2010. At the meeting the MPC members voted unanimously (9 -0) to leave interest unchanged at 0.50% and asset purchases (£375bn). Two of the MPC members regarded this month’s decision as finely balanced most likely Martin Weale and Ian McCafftery, who have previously dissented at the August 2014 meeting.

The MPC remit is to target inflation at 2%, the most recent readings of CPI have been recorded at zero, however the minutes noted that the Sterling feed through to CPI may be faster than expected. If the members are signalling a rise in inflation, with monetary policy meant to target 12 months ahead, then a rate rise isn’t far away. Credit Agricole’s Valentin Marinov was predicting a Q1 2015 rate hike at a Bloomberg event on Tuesday.

The Bank of England is currently in a quiet period, as the UK general election is only two weeks away, so the communication from the central bank is limited.

Sterling was bid following the release of the minutes as it highlighted that all MPC members agreed next rate move likely to be an increase. GBPUSD traded up over half a cent from 1.4940 to above 1.50. The short term risk is primarily the uncertainty of the outcome of the UK general election.  Voters go to the ballot box in just over two weeks and the polls predicting no outright majority. As the election nears expect volatility to increase, with Sterling weakness to be associated. This morning’s GBP strength on the expectation of a rate hike, will most likely be overshadowed by the political uncertainty, with the risk to the downside.

GBPUSD: 1.5005

EURGBP: 0.7181

FTSE 100: 7,004

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