Bank of England Raises Rates; 6 Percent Becomes a Possibly

As expected, the Bank of England lifted interest rates for the fifth time since last August by 25bp to 5.75 percent. The price action of the currency pair indicates that the move was completely priced into the market.

The knee jerk rally was quickly reversed as traders came to the realization that even if the Bank of England were to raise rates again this year, they would wait a few months before doing so. In the accompanying statement, the central bank indicated that the inflation risks remains to the upside and they are concerned that it will remain above their target for some time. This is a clear signal that interest rates will be taken to 6 percent this year and it is just a matter of when. Bond yields have moved higher on the back of the announcement, but having climbed significantly going into the latest rate decision, we could see a continued correction in the GBP/USD. The minutes from this meeting will not be released for another few weeks - the balance of the votes will shed more light on how urgent the central bank is to raise rates again.