(Kitco News) – Gold is selling off against the sterling after the Bank of England lowered its benchmark interest rate.
In a much-anticipated move, the BoE cut its Bank Rate by 25 basis points to 4.00% early Thursday morning. Five of nine Monetary Policy Committee members voted in favor of the cut, with the other four voting to leave the rate unchanged.
The central bank said that it had room to cut rates as inflation has continued to fall.
“There has been substantial disinflation over the past two and a half years, following previous external shocks, supported by the restrictive stance of monetary policy,” the BoE said in its statement. “That progress has allowed for reductions in Bank Rate over the past year. The Committee remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term.”
Looking ahead, the BoE said that it expects to cut rates further in 2025, but it will proceed with caution.
“A gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate,” the statement said. “The restrictiveness of monetary policy has fallen as Bank Rate has been reduced. The timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease. Monetary policy is not on a pre-set path, and the Committee will remain responsive to the accumulation of evidence.”
Gold sold off against the British pound following the rate cut and signal of further easing. XAU/GBP last traded at £2,514.67 an ounce for a loss of 0.30% on the day.
