Investing.com — Pound Sterling pared its gains against the dollar and fell against the euro after the Bank of England (BOE) decided to keep bank interest rates steady at 4.75%. This move was expected, but it is worth noting that three out of nine policymakers were in favor of a rate cut.
The BOE expects a slight increase in inflation in the near term, and economic growth could be weaker at the end of 2024 than previously expected. Policymakers are faced with the challenge of maintaining price stability without over-tightening monetary policy.
After the decision, the price rose from 0.8236 to 0.8264 and fell from 1.2631 to 1.2593.
The Federal Reserve cut interest rates by 25 basis points on Wednesday, but indicated it will slow the pace of cuts. US interest rates are expected to remain at higher levels for longer, leading to a greater policy difference with other major central banks.
Meanwhile, yen weakness raises the possibility of currency intervention. After an aggressive Fed meeting, rates have risen well above 155 due to a rate hike by the Bank of Japan (BOJ) and an apparent lack of urgency to increase.
Despite the yen being the most undervalued currency in the G-10, the prospect of higher US yields and a hesitant BOJ suggests that Japanese authorities could face a USD/JPY value of 160 for most of 2025.
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