Gold in British pounds bounces off lows as BoE raises interest rates by 50 basis points
(Kitco News) - The gold price in British pounds has bounced off its lows as the Bank of England raised the Bank Rate by 50 basis points and continued to signal its commitment to bring inflation back down to its 2% target.
The 50-basis point move, which pushes U.K interest rates to 2.25%, was in line with market expectations.
Gold against the pound continues to trade in negative territory but has managed a small bounce off its lows in initial reaction. Spot gold priced in sterling last traded at £1,475 an ounce down 0.58% on the day.
The BoE while maintaining its focus on inflation, said that uncertainty around energy prices have stabilized after the government announced consumer support including the Energy Price Guarantee.
“The Guarantee is likely to limit significantly further increases in CPI inflation, and reduce its volatility, while supporting aggregate private demand relative to the Committee’s August projections,” the BoE said in its monetary policy statement.
However, the Bank added that inflation will still remain elevated through the rest of the year.
“Nevertheless, energy bills will still go up and, combined with the indirect effects of higher energy costs, inflation is expected to remain above 10% over the following few months, before starting to fall back,” the statement said.
“The MPC will take the actions necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit. Policy is not on a pre-set path. The Committee will, as always, consider and decide the appropriate level of Bank Rate at each meeting. The scale, pace and timing of any further changes in Bank Rate will reflect the Committee’s assessment of the economic outlook and inflationary pressures,’ the committee added.
Not only is inflation expected to remain stubbornly high, but the Bank of England sees the economy contracting in the third quarter by 0.1%. This would be the second quarter of negative growth, which traditionally is the definition used for a recession.