(Kitco News) - Gold is holding elevated gains against the British pound but could struggle to attract new momentum as the Bank of England left interest rates unchanged and reiterated its gradual, careful approach to further easing.
In a much-anticipated move, the BoE kept its Bank Rate unchanged at 4.00% early Thursday morning. However, the decision was not unanimous; two of the nine Monetary Policy Committee members voted in favor of a cut.
“A gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate. 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,” the central bank said.
The central bank provided little forward guidance on its monetary policy, but analysts and economists expect further easing through year-end.
Michael Brown, Senior Market Analyst at Pepperstone, said that moving forward, inflation data will remain the key element in determining whether the BoE continues to lower interest rates.
“Having maintained the ‘gradual and careful’ guidance, one can reasonably assume that the MPC’s base case is to continue with the present path of one 25bp cut per quarter, though the bar to said cuts is clearly a relatively high one, after 4 members dissented against the August reduction,” he said. “The September inflation data, due 22nd October, remains the key date for the diary, and potentially the sole determinant of whether another cut will come before year-end. If, next month, headline CPI prints at, or below, the Bank’s expected 4% peak, then a 25bp cut at the November MPC is likely – as, for now, remains my base case. That said, a rise in headline CPI north of that 4% mark, especially if accompanied by a renewed intensification in underlying price pressures, would likely kill the possibility of any further Bank Rate cuts this year.”
The gold market is not seeing any significant moves against the British pound in its initial reaction to the BoE’s monetary policy decision. Spot gold last traded at £2,689.93 an ounce, up 0.17% on the day.
Gold’s move against the pound is in line with the broader move against the U.S. dollar. Spot gold last traded at $3,667 an ounce, up 0.18% on the day.
