Fundamental Comment

Pound rises despite BOE estimates of 14% contraction

Pound rises despite BOE estimates of 14% contraction

Pound Sterling rose during Thursday's trading, after the Bank of England (BOE) decided to keep the interest rate unchanged, in addition to its willingness to take more steps if the economic crisis left by the pandemic of "Covid-19" continues.

As of 09:35 GMT, the British pound trader slightly higher against the U.S dollar at 1.2363, set for its first daily gain in five sessions.

Against the euro, the British currency rose by 0.16 percent to trade at 1.1448, while the highest level recorded during the session was at 1.1482.

In a monetary policy statement issued on Thursday, the Bank of England stated that it decided to fix the interest rate at its current level of 0.1 percent.

The decision to keep the interest rate unchanged came unanimously, as monetary policy members voted in favor of the move.

The BOE also decided to continue the planned quantitative easing program with a value of £200 billion, bringing the total bond purchases program to a total of £645 billion.

But this decision was made by a majority of policymakers, as step 7 was approved by members while two on the committee opposed it, who preferred the additional stimulus to be 100 billion pounds.

On the economic outlook, the central bank expects the UK economy to shrink by about 14 percent during 2020 as a whole, driven by a 25 percent decline in the second quarter.

Given the easing of social divergence, the BOE predicts that the economic downturn will be a temporary issue and a rapid recovery will follow.

The Bank stressed that these expectations are based on measures to contain the Corona pandemic domestically and globally.

BOE also expects the country's unemployment rate to reach 8 percent this year, before falling to 7 and 4 percent, respectively, in the next two years.

Since the beginning of the pandemic, the British central bank has cut interest rates twice from 0.75 percent to 0.1 percent, and launched an additional £200 billion bond purchase program.

In the monetary policy statement, the bank confirmed that the monetary policy committee will continue to monitor the situation closely and is ready to take further measures as necessary to support the economy and ensure the continued return of the inflation rate to its target of 2 percent.

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