The Bank of England (BoE) announced on Thursday that it would keep the bank interest rate at 3.75% after its March monetary policy meeting, in line with broad expectations. All nine members of the Monetary Policy Committee (MPC) voted in favor of this decision. Markets expected that two decision-makers would vote for a rate cut.
Follow our live coverage of the Bank of England’s interest rate decisions and market reaction.
Key takeaways from the BoE policy statement
“We have kept interest rates unchanged as we assess developments in the war in the Middle East.”
“Higher global energy prices are already weighing on gasoline prices and, if they continue at constant levels, will push up energy bills later in the year.”
“Whatever happens, our job is to ensure that inflation returns to the 2% target.”
“Employees estimate that CPI in Q2 will be around 3%, CPI in Q3 to 3.5% due to the global energy price shock (previously: Q2 2.1%).”
“Staff continues to estimate first-quarter core GDP growth to be 0.1%-0.2%.”
“MPC Alert on Increased Risk of Second Round Domestic Wage and Price Setting Effects.”
“A larger or longer-lasting shock would require a more restrictive policy stance.”
“The MPC is ready to act as needed to ensure CPI remains on track to reach 2%, it sees a range of possible responses.”
“Unlike 2022, the latest energy shock is occurring while growth is below potential and the economy has spare capacity.”
“The MPC also assesses the inflationary effects of the likely economic weakening caused by higher energy prices.”
“Policy would need to be less restrictive if the shock is very short-lived or if a large stock build reduces medium-term price pressures.”
“Agent survey shows that base salary settlements for 2026 average 3.6% (previously: 3.4%).”
Market reaction to the BoE’s political decision
GBP/USD rose slightly in response to the immediate reaction to BoE policy decisions. At the time of this publication, the pair was up 0.3% at 1.3300.
Today’s price of sterling
The table below shows the current percentage change of the British Pound (GBP) against the major listed currencies. The British pound was strongest against the Swiss franc.
| USD | EUR | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.22% | -0.31% | -0.54% | 0.05% | -0.17% | -0.24% | 0.18% | |
| EUR | 0.22% | -0.09% | -0.35% | 0.26% | 0.05% | -0.03% | 0.40% | |
| GBP | 0.31% | 0.09% | -0.27% | 0.35% | 0.14% | 0.07% | 0.48% | |
| JPY | 0.54% | 0.35% | 0.27% | 0.58% | 0.36% | 0.25% | 0.72% | |
| BOOR | -0.05% | -0.26% | -0.35% | -0.58% | -0.20% | -0.30% | 0.13% | |
| AUD | 0.17% | -0.05% | -0.14% | -0.36% | 0.20% | -0.08% | 0.34% | |
| NZD | 0.24% | 0.03% | -0.07% | -0.25% | 0.30% | 0.08% | 0.41% | |
| CHF | -0.18% | -0.40% | -0.48% | -0.72% | -0.13% | -0.34% | -0.41% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column and the quote currency from the top row. For example, if you select British Pound from the left column and move along the horizontal line to US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The following section was published as a preview of the Bank of England’s (BoE) policy announcements at 04:00 GMT.
- The Bank of England is expected to keep its key interest rate at 3.75% for the second time in a row on Thursday.
- The UK economy came to an unexpected halt in January amid a looming energy inflation shock.
- The pound sterling will crash significantly after the BoE’s monetary policy announcements.
The Bank of England (BoE) is on track to leave its benchmark lending rate unchanged at 3.75% second meeting in a row on Thursday, as the macro context has completely changed over the last three weeks.
Before the Iran war, markets were leaning towards short-term interest rate cuts, but a pointed rise in oil prices was not changed expectations and investors now generally expect the BoE to make a decision about a wait-and-see approach..
Monetary Policy Committee (MPC) decision-makers take part in the vote 7-2 keep interest rates unchanged after the March monetary policy meeting. At its previous meeting, the committee also decided to keep interest rates on hold after a pointed 5-4 vote split.
While it won’t be Super Thursday – there will be no Monetary Policy Report (MPR) and no press conference from Governor Andrew Bailey – the pound sterling (GBP) is prepared for great reaction to the UK Central Bank announcements at 12:00 GMT.
What can you expect from the Bank of England’s policy announcements?
As the war in the Middle East continues, The BoE has a dilemma whether to overcome the short-term energy-induced inflation shock or counter it at the expense of a brittle economy.
Figures from the Office for National Statistics (ONS) show that In January, the UK economy stagnateddespite expectations of growth of 0.2% in the reporting period.
Meanwhile, inflation as measured by the change in the Consumer Price Index (CPI) declined significantly in January to 3% annualized from 3.4% in December, which was in line with market estimates.
Core inflation excluding energy, food, alcohol and tobacco was 3.1% in January, down from 3.2% in December.
Falling inflation prompted markets to quickly raise bets that the BoE would cut its benchmark interest rate at its March meeting. However, this data set was released before the war in the Middle East, prompting the markets to make this decision reevaluate your expectations for the central bank to extend the pause in interest rate cuts.
Taking into account the widely expected decision to leave interest rates unchanged, attention will be focused on the composition of the MPC voteswhich may prove more hawkish than February’s 5-4 hold and expected 7-2 split.
In addition, the content of the Monetary Policy Statement (MPS) and meeting minutes will be analyzed to assess the timing of the next interest rate cut in the face of geopolitical uncertainty.
“We think the argument for the BoE to raise rates is weakerpartly given that it has cut interest rates in a less aggressive manner so far this cycle, and at least some MPC members likely still view interest rates as restrictive,” Standard Chartered analysts said in a research note.
“We still see further easing of monetary policy by the BoE (we forecast a final interest rate of 3.00%), but the timing of these cuts is highly uncertain and kept under review – although a short-term cessation of hostilities and lower energy prices could allow our current cut schedule (quarterly from the second quarter onwards), there is a growing risk that the prolonged raise in energy prices may postpone the next reduction to the second half of 2027– they added…
How will the BoE’s interest rate decision affect GBP/USD?
GBP maintained his recovery from three-month lows of 1.3219 against the US dollar (USD), which will influence the BoE’s monetary policy decision.
If the BoE statement adopts a cautious tone and the MPC vote split becomes hawkish amid the potential risk of rising inflation, sterling could see an extension of the recent recovery. In such a case, the GBP/USD pair may extend further towards the 1.3500 level.
On the other hand, sterling could return to multi-month lows below 1.3250 against the dollar if the central bank prioritizes economic recovery over a transient inflation shock. Markets would see this as a dovish signal, reviving expectations for an interest rate cut later this year.
Dhwani Mehta, Chief Analyst for the Asian Session at FXStreet, presents his brief technical forecasts for GBP/USD:
“Short-term sentiment is slightly bearish as the spot holds below the 21-day, 50-day and 100-day straightforward moving averages (SMAs), which are stacked descending within the 200-day SMA and recovery attempts. The 14-day relative strength index (RSI) of 43 is holding below the 50 line, indicating sustained but not extreme selling momentum that makes rallying is risk-prone.
“Initial resistance appears at the 21-day SMA near 1.3415, followed by the 50-day SMA near 1.3510 and the end-January high near 1.3695. On the other hand, immediate support is at 1.3219, last Friday’s three-month low, ahead of 1.3150 (psychological level),” Dhwani added.
Sterling FAQs
The pound sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. As of 2022, it is the fourth most traded currency unit in the world, accounting for 12% of all transactions, with an average value of $630 billion per day. Its key trading pairs are GBP/USD, also known as “The Cable”, which makes up 11% of FX, GBP/JPY or “The Dragon” as traders call it (3%), and EUR/GBP (2%). The pound sterling is issued by the Bank of England (BoE).
The most significant factor influencing the value of the pound sterling is the monetary policy pursued by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a constant inflation rate of around 2%. The basic tool to achieve this goal is to adjust interest rates. When inflation gets too high, the BoE will try to contain it by raising interest rates, making access to credit more steep for citizens and businesses. 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 that economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to lower borrowing prices so that companies borrow more to invest in projects that generate economic growth.
The published data are used to assess the condition of the economy and may affect the value of the pound sterling. Indicators such as GDP, manufacturing and services PMIs and employment can influence the direction of the GBP exchange rate. A mighty economy is good for sterling. Not only will it attract more foreign investment, but it may prompt the BoE to raise interest rates, which will directly strengthen the British pound. Otherwise, if economic data is feeble, sterling is likely to fall.
The next significant data release for the pound sterling is the trade balance. This indicator measures the difference between what a country earns from exports and what the country spends on imports over a given period. If a country produces a highly sought after export, its currency will only benefit from the additional demand created by foreign buyers willing to buy those goods. Therefore, a positive net trade balance strengthens the currency and vice versa in the case of a negative balance.
