The gold market has sustained its recent gains against the British pound, consolidating its upward trend, as the Bank of England (BoE) opted to keep interest rates stable. Despite maintaining the Bank Rate at 5.25%, the BoE hinted at potential future easing of its monetary policy within the year.
In its monetary policy statement, the central bank indicated its intention to lower interest rates, in line with market expectations. The BoE’s May Monetary Policy Report outlines updated projections for economic activity and inflation, assuming a gradual decline in the Bank Rate from 5¼% to 3¾% by the end of the forecast period. This contrasts with the previous endpoint of 3¼% projected in February.
The recent decision by the Bank of England hasn’t caused much change in the price of gold. Gold prices are staying steady around the highs they reached last month. Right now, the price of gold is at £1,859.47 per ounce, which is a small increase of 0.20% for the day.
The Bank of England also talked about how the economy is doing. They predict that the national GDP (which measures how much the country produces) will grow by 0.2% in the second quarter of the year.
Even though the economy is getting better, the Bank of England thinks that the demand for goods and services won’t grow as fast as the supply of those things. They also expect there to be more people looking for jobs than there are jobs available, which could affect how prices change (inflation). So, there’s still some uncertainty about how things will go with jobs and prices.
There’s a lot of uncertainty about the data coming from the ONS Labour Force Survey, which makes it harder to understand how the job market is changing. The Monetary Policy Committee (MPC) thinks that, overall, the job market is getting a bit looser, but it’s still tighter than usual when you compare it to past trends.
Even though the Bank of England didn’t make big changes to its plans, some experts noticed that two members of the bank wanted to lower interest rates during the meeting. Usually, economists thought everyone would agree to keep rates the same.
Michael Brown, who works as a Senior Research Strategist at PepperStone, pointed out that MPC Deputy Governor David Ramsden and Swati Dhingra both wanted to lower rates right away, which shows they have more cautious views.
Brown said that this move by the MPC shows they are leaning towards being more cautious. This makes it more likely that they will decide to lower the Bank Rate at the next meeting in June.
