(November 02, 2017) The pound fell sharply on Thursday after the Bank of England raised interest rates for the first time in almost a decade, but said that any further hikes would be at a gradual pace and to a limited extent.
GBP/USD was down 0.88% at 1.3125 by 08:06 AM ET (12:07 PM GMT) from around 1.3285 earlier.
The BoE voted to raise rates to 0.5% from 0.25%, reversing the rate cut of August 2016, when it eased monetary policy to help cushion Britain’s economy in the aftermath of the Brexit vote.
The monetary policy committee was split seven to two, with deputy governors Sir Jon Cunliffe and Sir Dave Ramsden both voting to leave borrowing costs unchanged.
The bank says it only expects interest rates to rise gradually over the next three years.
“The MPC now judges it appropriate to tighten modestly the stance of monetary policy in order to return inflation sustainably to target,” the meeting minutes said.
“All members agree that any future increases in Bank Rate will be at a gradual pace and to a limited extent.”
Sterling fell to one-week lows against the euro following the decision, with EUR/GBPadvancing 1.21% to 0.8878 from 0.8758 earlier.