The pressure of uncertain prospects continues to loom over the UK recovery. In this context, the Bank of England may leave interest rates at minimum levels and the next year. At yesterday's trading the pound fell against the dollar by more than 170 pips after the Bank of England's officials announced abount saving rates at 0.5%. They explained their decision by the fact that sharp slowdown in the UK can reduce growth and inflation.
Yesterday's voting records showed 1-0-8 in favor of the retention rate at previous level. Bank of England Governor Mark Carney made a speech and added that the strong British economic data successfully restrain "foreign crisis." Especially it concerns the emerging markets, which continue to depend largely on the Fed's decision on interest rates and the situation on commodity markets. The Bank of England published its quarterly report, which emphasized that the domestic economy is stable sustained and real income growth is expected to record high since the beginning of financial crisis. Investment sentiments are also remained unchanged at a high level.
However, the main regulator of Britain lowered forecasts for growth within the country as well as on the global. After that, raw material prices resumed their decline. Officials also predict a further decrease in prices for oil and gas. Thus, energy firms will reduce costs thereby lowering value of products to potential buyers. It can direct consumer inflation downward to the level of 3-4 quarters of 2017. Market participants interpreted the amendments in forecasts of growth and inflation as weakness of BoE, this triggered a sharp depreciation of the pound against the dollar (by almost 2 per cent), as well as against the euro (for more than 1 cent).