Sterling rallies on BoE minutes
23 April 2008
Sterling rose to a session high against the Euro and the Dollar on Wednesday, after the BoE minutes highlighted that two of the nine MPC policymakers opposed this month’s 0.25% rate cut. It was revealed that arch hawks Tim Besley and Andrew Sentence voted to keep rates on hold at 5.25%, arguing that borrowing costs needed to decline at a more gradual pace. However, it came as little surprise that David Blanchflower opted for a 0.5% rate cut, with the remaining six members voting for a 0.25% cut.
It was the first three-way split since May 2006, with the market largely expecting a unanimous decision in favour of cutting rates. The outcome will have reduced expectations for a consecutive rate cut in May, especially as the majority of policymakers appeared split over the risks to inflation. Some believe that downside risks to inflation have become more apparent, while in contrast some thought the issue was less clear-cut.
Meanwhile, Sterling gains were capped after British mortgage approvals slumped to a record low in March, falling nearly 50% on last year. Home loan approvals fell to 35,417 from February’s 43,147 in a further sign that the UK housing market is cooling fast.