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Bank of England divided on holding interest rates at historic low

EURUSD News by Allie Longford on 08:43 June 15, 2017 EST
Rising inflation presently at 2.9% annual widened the divide at Bank of England on Thursday as three members voted to hike interest rates.

The Monetary Policy Committee held interest rates unchanged at its historic low 0.25%, unchanged since 2007, but minutes of the meeting showe three out of eight members voting for a rise in interest rates to 0.5%.

A strong jobs market with unemployment below 5% was also mentioned to make the case for a rate hike and tightening of the existing QE program.

The Bank added that the pound's weakness since last week's indecisive General Election result would add to the pressure on inflation as sterling's fall since the Brexit vote has sent the cost of imported goods and energy soaring.

"A slowdown in household consumption and gross domestic product as a whole had recently begun [...] although consumer confidence had held up, there had been further signs of a slowing housing market and new car registrations had fallen sharply," the minutes also noted.

The market reacted to the news. The FTSE 100 index fell 1.2% following the details of the decision while the pound spiked to nearly 1.28 but then faded the advance. Against the euro, the pound broke above 1.14 euros and was up 0.7% on the day.

High street figures earlier this week revealed more evidence that households are slowing in their spending, with retail sales dropping by 1.2% in May, against a 2.5% rise in April.