As the Bank of England (BoE) left its interest rate policy unchanged, sterling held steady against the US dollar and other major currencies. Jesús Cabra Guisasola, associate at Validus Risk Management, said: “As widely expected, the Bank of England voted to keep both the base rate (0.1%) and the asset purchase program (£875bn) unchanged.  

“The vote was 7-1 on a continued bond buying programme at the current pace, with the dissenting vote from Michael Saunders, who has moved to a more hawkish stance and raised concerns about the spike in inflation. Nevertheless, the BoE has modestly changed its forward guidance around QE, and it is intending to start reducing the stock of purchased assets when the benchmark hits 0.5%, which is earlier than the previous assumption of 1.5%.   

“Moving forward, we should expect the first rise in interest rates from the MPC during the second half of 2022, with the market currently pricing for the first hike in June 2022. However, if the economy continues growing as expected with inflation above the 2% target, we could see justification for the BoE to act sooner.”