In a widely anticipated move, the Bank of England voted to keep interest rates on hold at 0.25% while citing the positive outlook for inflation. According to the Central Bank, inflation is set to return to 2.00% in February before trending above the level in the subsequent months.
Furthermore, in a more hawkish sign for the economy, the BoE upgraded its projections for growth for 2017 and 2018, with the Monetary Policy Committee forecasting 2.00% GDP growth for this calendar year before retreating to 1.60% in 2018.
While higher inflation may be tolerated in the meantime, should it continue to rise beyond levels deemed comfortable, the MPC has indicated that they could adjust policy depending on how prices evolve over the medium-term.
Despite the more hawkish viewpoint, the Brexit affirmation vote combined with the Bank of England viewpoint drove the Pound 100 pips lower against the Euro before recovering modestly.