BoE Press Conference: Bailey discusses interest rate outlook after the expected status quo
Bank of England (BoE) Governor Andrew Bailey is addressing a press conference and responding to media questions, explaining the reasons behind the central bank’s decision to hold the benchmark policy rate at 3.75% in an 8-1 vote split following the April monetary policy meeting.
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Key takeaways from Bailey’s Press Conference
Monetary policy cannot prevent higher global energy prices from affecting uk economy and inflation.
Where we go from here will depend on size and duration of shock to energy prices.
We now project inflation will rise to a little over 3.5% by end of year.
Initial indirect effects of inflation are likely to be largest for food prices.
The longer the conflict in Middle East lasts, the worse the impact will become.
Size of second round effects is uncertain and will take time to build.
Monetary policy faces a difficult judgement call as cannot wait for conclusive evidence on 2nd round effects.
Under scenarios A and B, necessary interest rate response is largely achieved by not cutting rates as was expected in Feb and without further rate increase.
Prolonged spike in energy prices could lead to higher Bank Rate.
There is a good deal of space available to accommodate inflation pressures by not cutting rates as had been previously expected.
Sheer volatility of energy prices makes it impossible to put probabilities on different scenarios.
It would be a mistake to wait for second round effects before acting, that would be too late.
It will take time before we get a good read on pay as most annual settlements have already been agreed.
I think energy price profile of scenario B is more plausible than scenario A.
We do not hear that rapid return to pre-conflict energy supply conditions is likely
It is an active hold today, not a passive one.
We are not giving a message that interest rates are going up.
There are paths through this where we don't have to increase rates, and paths where we do.
I don't think the interest rate curve is in the wrong place.
This section below was published at 11:00 GMT to cover the Bank of England's policy announcements and the initial market reaction.
The Bank of England (BoE) announced on Thursday that it left the benchmark policy rate unchanged at 3.75%, as widely expected, following the conclusion of the April monetary policy meeting.
The vote showed the expected split on the Monetary Policy Committee (MPC), with one member favoring a 25-basis point (bps) rate hike.
Takeaways from BoE Monetary Policy Summary
BoE Chief Economist Huw Pill voted to increase rates by 0.25 percentage points
Bailey says "reasonable" to hold rates at 3.75% given uk economic situation and uncertainty in Middle East.
CPI likely to be higher this year as effect of higher energy prices passes through.
Bailey says our job is to make sure that inflation gets back to 2% after initial impact of war on energy prices has passed.
BoE says there is a risk of material second-round effects from inflation on wage- and price-setting, policy would need to lean against this.
BoE says weaker economy and labour market and tighter financial conditions will help reduce inflation over time.
BoE Monetary Policy Report highlights
BoE has not updated central economic forecasts, gives new forecasts based on three scenarios for energy prices and inflation persistence.
BoE forecasts 2026 CPI averaging 3.3%-4.5% under different scenarios (Feb central projection: 2.2%).
BoE forecasts 2027 CPI averaging 2.6%-4.8% under different scenarios (Feb central projection: 1.9%).
BoE forecasts 2028 CPI averaging 1.5%-2.9% under different scenarios (Feb central projection: 2.0%).
BoE forecasts for 2027 GDP growth 0.8%-1.0% under different scenarios (Feb central projection 1.5%).
BoE forecasts for 2026 GDP growth 0.7%-0.8% under different scenarios (Feb central projection 0.9%).
BoE says most inflationary scenario "was likely to warrant a forceful tightening of monetary policy".
BoE projections show inflation peaking at 6.2% in Q1 2027 under most inflationary scenario if rates only rise as markets expect.
Market reaction to BoE policy announcements
The Pound Sterling shows little reaction to the BoE policy announcements, with GBP/USD up 0.34% on the day at 1.3515, as of writing.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.24% | -0.31% | -1.90% | -0.22% | -0.52% | -0.59% | -0.69% | |
| EUR | 0.24% | -0.03% | -1.68% | 0.02% | -0.27% | -0.32% | -0.42% | |
| GBP | 0.31% | 0.03% | -1.66% | 0.06% | -0.22% | -0.27% | -0.39% | |
| JPY | 1.90% | 1.68% | 1.66% | 1.70% | 1.41% | 1.29% | 1.20% | |
| CAD | 0.22% | -0.02% | -0.06% | -1.70% | -0.31% | -0.39% | -0.48% | |
| AUD | 0.52% | 0.27% | 0.22% | -1.41% | 0.31% | -0.05% | -0.15% | |
| NZD | 0.59% | 0.32% | 0.27% | -1.29% | 0.39% | 0.05% | -0.10% | |
| CHF | 0.69% | 0.42% | 0.39% | -1.20% | 0.48% | 0.15% | 0.10% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
This section below was published at 06:00 GMT as a preview of the Bank of England's (BoE) interest rate decision.
- The Bank of England is set to hold the interest rate at 3.75% for a third straight meeting on ‘Super Thursday’.
- The BoE Monetary Policy Report, MPC vote split and Governor Bailey’s words hold the key.
- The Pound Sterling could see the next big move on the BoE policy announcements.
The Bank of England (BoE) is widely expected to hold the benchmark Bank Rate unchanged at 3.75% for a third consecutive meeting on Thursday, as traders assess the impact of the Middle East war on prices and the UK economy.
The Persian Gulf conflict-led elevated Oil prices have raised inflation concerns and kept expectations of a BoE rate hike this year on the table.
Against this backdrop, the Monetary Policy Committee (MPC) policymakers are seen voting 8-1 to leave rates unchanged at the April monetary policy meeting, following a unanimous hold in March.
It’s a “Super Thursday” – the Monetary Policy Report (MPR) will be published alongside the policy statement and the Minutes of the meeting at 11:00 GMT, followed by a press conference from Governor Andrew Bailey at 11:30 GMT.
The volatility around the Pound Sterling (GBP) is expected to ramp up on the United Kingdom (UK) central bank’s policy events.
Bank of England to stick to wait-and-see guidance
With the US-Iran conflict entering its third month and no signs of a breakthrough concerning the Strait of Hormuz, investors are waiting to see whether the BoE offers any hints on a potential interest rate hike later this year as the war impact continues to feed into inflation.
Data from the Office for National Statistics (ONS) show that the UK inflation, as measured by the change in the Consumer Price Index (CPI), rose to 3.3% year-over-year (YoY) in March from 3.0% in February, showing the first hit from the Iran war.
Services inflation was up, though only because of volatile air fares due to the Easter holidays.
However, the key question is whether the leap in energy prices would ignite broader inflation or a weak jobs market would keep a lid on demand for higher pay and price increases by companies.
The latest labor market data showed that British wage growth slowed further, as Average Earnings, excluding Bonus, came in at 3.6% YoY in the three months ending February, down from 3.8% in the three months to January.
That being said, the BoE’s updated inflation and growth projections in the MPR will be closely scrutinized for fresh guidance on the rate outlook, especially after the central bank said in March that it “stands ready to act” to combat inflation stemming from the war.
Meanwhile, Ofgem, the UK’s energy regulator, cut its price cap by 7% in April, reducing typical annual household energy bills, although that could be offset by the war impact and tax rises as the new tax year begins.
Therefore, the BoE will likely stick to its wait-and-see stance, reiterating that it remains ready to act on inflation, trying to balance market expectations around prospects of higher inflation and a rate hike later this year.
Analysts at BBH noted, “the swaps curve is pricing nearly 75bps of rate hikes over the next twelve months to 4.50%. BoE rate hike bets are too rich in our view given excess slack in the economy.”
“In February, the BoE estimated a negative output gap of -1% of GDP in 2026. The MPR will include an update of that estimate,” the analysts added.
How will the BoE interest rate decision impact GBP/USD?
The GBP remains below the 1.3600 barrier against the US Dollar (USD) in the lead-up to the BoE’s showdown.
If the BoE’s statement and Governor Bailey stick to the cautious rhetoric while the MPC vote split aligns with the market expectations or surprises with a unanimous hold, the Pound Sterling could see a fresh breakdown, driving GBP/USD toward the 1.3400 level.
Conversely, the GBP could extend the uptrend toward the 1.3700 round figure against the USD should the central bank express concerns over inflation, signalling a hawkish pivot. GBP/USD could also gain traction if the MPC vote split shows more than one dissenter on a no-rate-change decision.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for GBP/USD:
“The 21-day Simple Moving Average (SMA) at around 1.3444, the 50-day SMA near 1.3409, and the 200- and 100-day SMAs clustered between roughly 1.3414 and 1.3467 all sit below spot, suggesting a supportive underlying structure. The Relative Strength Index (RSI) around 56 on the daily chart stays in positive territory without yet signaling overbought conditions, hinting that upside momentum remains constructive while not overstretched.”
“On the downside, initial support is reinforced by the 100-day SMA at 1.3467, with the 21-day SMA at 1.3444 providing a nearby secondary floor. Below there, the 200-day SMA around 1.3414 and the 50-day SMA close to 1.3409 form a broader demand zone that would need to give way to undermine the current constructive tone. Conversely, buyers need to reclaim the 1.3600 mark to revive the uptrend. The next topside targets are seen at the 1.3700 round level and the February high of 1.3733, ” Dhwani adds.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.