Bank of England hikes rates to 4.25%

Daily Currency Update

The Bank of England hiked interest rates by 0.25% yesterday bringing the Bank rate to 4.25%, its highest level since 2008. The hike was in line with most forecasts so after some whipsawing in the immediate aftermath of the decision GBP/USD finished the UK trading day around the 1.23 level, close to where it had been at the start. There was an initial push higher as markets digested the 7-2 split in favour of raising rates by the Monetary Policy Committee with some analysts expecting that it would be 6-3. In an unscheduled press conference Bailey commented that the Bank was open to more hikes if necessary and it would act to control persistent pressures. He also however seemed to shrug off Wednesday's surprise rise in CPI saying it could be a one off and still expected inflation to fall sharply in the second half of the year. At present markets are split as to whether we will see another rise to 4.5% at May 11th's policy decision with some expecting rates to now be held for a period. Obviously a lot will hinge on inflation figures between now and then as well as other economic indicators. GBP/USD is down to 1.2240 as the dollar ends the week on the front foot. GBP/EUR sits around 1.1360.