BoE Interest Rate Decision: BoE leaves interest rates on hold, as expected

The BoE voted to leave interest rates unchanged at 4% for a second meeting, in line with expectations. The vote split was 5-5, with 5 voting to leave rates on hold and 4 voting to cut rates by 25 basis points. This was more dovish than the 6-3 vote expected. The vote split was very tight, leaving the deciding vote with BoE Governor Bailey.

The central bank removed the word “careful” from its guidance, now saying that rates are on a gradual downward path. 

UK inflation was cooler than expected in September at 3.8%, below the 4% peak that the BoE expected, which BoE Governor Bailey called “promising”.  

The BoE decision was a dovish-hold stance, with more rate cuts expected should the disinflation process continue.  The “hold” is understandable given the uncertainty surrounding the Budget on November 26.

The market is pricing in a 62% chance of a 25-basis-point rate cut in December, unchanged from before the meeting. However, the market has lifted rate cut expectations for next year, seeing 62 basis points of cuts by the end of 2026.

GBP VS DOLLAR (GBP/USD):

If we take a closer look at the technicals, we can observe how price was trading just above 1.3190 before the announcements, and post the decision GBP/USD slipped to 1.3170. GBP/USD trades around a 7-month low and GBP trades at a 2.5 year low against the EUR. On the four hour chart. GBP/USD trades in a downward trend. Sellers need to take out 1.30 support to extend the bearish move. A rise above 1.31 negates the near term downtrend.

FTSE 100 (UK100):

The FTSE 100 has also seen a direct impact from this BoE interest rate decision. Before the announcement, the price was trading around 9750, and currently, it is trading just above 9760, marking a modest rise. The FTSE trades in a rising triangle pattern. Buyers will look to rise above 9800 to fresh record highs. Support is seen at 9710, the 50 SMA.

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