Gold prices are holding modest gains against the British pound as the Bank of England (BoE) continues to maintain its interest rates at restrictive levels.
In line with expectations, the BoE kept its Bank Rate unchanged at 5.25% on Thursday. The decision, which saw two members advocate for a 25-basis point reduction to 5% while seven members voted to hold steady, met market predictions.
The latest monetary policy decision from the BoE has had little effect on gold, which was last traded at £1,841.73 an ounce, marking a 0.49% increase.
Some analysts had speculated that the BoE might cut rates due to weaker inflation pressures. While the central bank acknowledged that last month’s inflation had fallen to its 2% target, it opted for a cautious approach.
“Indicators of short-term inflation expectations have also continued to moderate, particularly for households. CPI inflation is expected to rise slightly in the second half of this year, as declines in energy prices last year fall out of the annual comparison,” the BoE noted in its monetary policy statement.
Despite holding rates, some committee members described the decision as “finely balanced.”
Analysts predict that the BoE will eventually begin to ease rates, following the trend of other major central banks.
“The next move in the Bank Rate is likely to be a cut, potentially at the next meeting in August, as the Monetary Policy Committee continues to ‘keep under review’ the duration of current restrictions. This cut, however, depends on the ongoing disinflation process and the June CPI figures not presenting any adverse surprises. Nonetheless, a cut is unlikely to be unanimous, with some MPC members still worried about intense earnings pressures and persistent services prices. These concerns will likely result in a gradual pace of policy normalization after the initial cut, with only one further 25-basis point cut, probably in November, expected for the remainder of 2024,” commented Michael Brown, Senior Research Analyst at Pepperstone.
