(Kitco News) - The gold market is seeing some modest profit-taking against the British pound as the Bank of England left interest rates unchanged as inflation pressures remain elevated.
As expected, the British central bank left the Bank Rate at 4.%. However, the 8-to-1 vote in favor of holding rates steady was slightly more hawkish than anticipated. Economists had forecasted a 7-to-2 vote.
The BoE’s relatively neutral stance comes as it renews its focus on inflation even as economic uncertainty weighs on growth expectations.
“While UK GDP growth estimates have been slightly stronger than expected at the time of the February Monetary Policy Report, business survey indicators generally continue to suggest weakness in growth and particularly in employment intentions. In recent quarters, subdued activity has been judged to reflect both demand and supply factors,” the central bank said in its monetary policy statement.
“Twelve-month CPI inflation increased to 3.0% in January from 2.5% in December, slightly higher than expected in the February Report. Domestic price and wage pressures are moderating, but remain somewhat elevated. Although global energy prices have fallen back recently, they remain higher than last year and CPI inflation is still projected to rise to around 3¾% in 2025 Q3. While inflation is expected to fall back thereafter, the Committee will pay close attention to any consequent signs of more lasting inflationary pressures,” the statement added.
The gold market is trading near session lows against the British pound but is not seeing any new selling momentum following the BoE’s monetary policy decision. Spot gold last traded at £2,337.40 an ounce, down 0.35% on the day.
The selloff against the pound reflects profit-taking in the broader market. Spot gold is trading at $3,034.90 an ounce, down 0.41% on the day.
The central bank also reiterated its balanced stance for gradual and careful rate cuts as inflation pressures ease.
“The Committee will continue to monitor closely the risks of inflation persistence and what the evidence may reveal about the balance between aggregate supply and demand in the economy. Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further. The Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting,” the monetary policy statement said.
Justin Low, Currency Analyst at Forexlive.com, said that although the BoE didn’t make any significant changes in its statement, there was a slightly hawkish tilt to the language, including the vote.
David Morrison - Senior Market Analyst at, Trade Nation said in a note that the BoE walks a fine line with its monetary policy.
“There are certainly good reasons why the Bank would consider easing monetary policy. There’s the UK’s dismal growth outlook for a start. Sentiment has soured amongst business leaders as they deal with increased employment costs thanks to the rise in employers’ National Insurance. But inflation remains sticky, and this morning’s employment data showed strong average earnings. All this comes on the back of the uncertainty over what President Trump will announce next on tariffs,” he said.
