By Yasin Ebrahim
Investing.com – The pound jumped against the dollar Thursday, after the Bank of England left interest rates steady, but signaled its warming up to the idea of tightening monetary policy as the central bank reined in its threshold to begin the tapering of bonds purchases.
GBP/USD rose 0.30% to $1.3927.
The Bank of England kept rates unchanged at 0.1%, and its monthly bond purchases steady at £895 billion. In a sign of the appetite to tightened policy earlier than expected, however, the members of the central bank’s monetary policy committee voted 7 to 1 voted to keep asset purchases steady until its benchmark rate reaches 0.5%. The central previously said it wouldn’t reverse quantitative easing until the rate reached 1.5%.
“Talking about the mechanics of tightening policy, that is another signal that tightening is drawing nearer,’ Ruth Gregory, senior UK economist at Capital Economics said, according to the Financial Times.
But despite the change in strategy, the bank isn’t likely to aggressively hike rates.
“In part, the change in strategy reflects the fact that negative rates are now considered part of the tool kit for the future. But it also underscores that Bank Rate simply isn't expected to rise back to that previous threshold of 1.5% for the foreseeable future,” Daiwa Capital Markets said