Pound surges as Bank of England monetary policy committee maintains interest rates – despite Brexit panic
The pound jumped nearly two per cent against the dollar after the Bank of England failed to cut UK interest rates, despite widely-held speculation it would move to calm fears over the impact of Brexit.
The pound was up 1.76 per cent against the dollar, at $1.3378, after it emerged the Bank's monetary policy committee (MPC) had voted 8-1 in favour of maintaining rates at 0.5 per cent for the 88th month in a row.
It leaped 1.35 per cent against the euro, to €1.2014. Yields on 10-year UK gilts rose by five basis points, to 0.79 per cent – while the FTSE 100 gave up some of its gains, falling to 6,691 points, from a high of 6,741 earlier today.
Read more: Over to you, Carney – our MPC has voted to cut rates
The decision came as a shock: markets had put the chances of the MPC cutting rates at 80 per cent in the lead-up to today's decision, thanks to volatility on markets across the globe in the wake of the EU referendum.
But Naeem Aslam, chief markets analyst at Think Markets UK, pointed out that the MPC's strategy may be to watch and wait.
"Basically they have saved their bullets as they have very limited number of them and want to wait for the right opportunity. The governor need to meet new Chancellor and wants to get better understanding of the economy and surely wants to be on the same page before they start firing."
Carney has previously said as much: at the end of June Carney said that although the Bank was preparing to slash rates, its powers were limited.
“Over the coming weeks, the Bank will consider a host of other measures and policies to promote monetary and financial stability.
“Part of that plan is ruthless truth telling. And one uncomfortable truth is that there are limits to what the Bank of England can do. The future potential of this economy and its implications for jobs, real wages and wealth are not the gifts of monetary policymakers.
“In particular, monetary policy cannot immediately or fully offset the implications of a large, negative shock.”