The Bank of England left interest rates unchanged at 5.75 percent today but to the surprise of the market, they released a statement justifying their decision. For the other central banks around the world, this is a common act, but for the BoE it is not.
The last time the BoE ever released a statement after they left interest rates on hold was in May 1999. Clearly, their decision to do so today is an attempt to let the markets know that they are watching the credit crisis and not asleep at the job. This is especially true since there was not much in the statement other than the fact that evidence of companies or households being affected by the disruption in the financial markets could be enough reason for the BoE to lower interest rates. The BoE is an exceptionally dynamic central bank that will not hesitate to shift monetary policy if necessary.
Written by Kathy Lien, Chief Currency Strategist of DailyFX.com