(Kitco News) - Gold prices against the British pound remain under pressure after the Bank of England raised interest rates in line with expectations and signaled further rate hikes in 2023 to bring inflation down.
As expected, Thursday, the Bank of England raised interest rates by 50 basis points to 3.50%. The move has not had much impact on gold prices; the spot market last traded at £1,441.65 an ounce against the pound.
Although gold prices are down against the pound, it is outperforming compared to losses against the U.S. dollar. Spot gold last traded at $1,777 an ounce, down 1.63% on the day.
The central bank said that a big risk to inflation remains the labor market and could prompt more tightening.
“The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response,” the BoE said in its monetary policy statement.
The central bank said that while inflation dropped more than expected in November to 10.7%, down from the peak of 11.1, it still remains persistently high.
“The majority of the Committee judges that, should the economy evolve broadly in line with the November Monetary Policy Report projections, further increases in Bank Rate may be required for a sustainable return of inflation to target,” the central bank said. “There are considerable uncertainties around the outlook. The Committee continues to judge that, if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary.”
The BoE does expect inflation to moderate in the first quarter of 2023.
