FOREX TRADING

BoE policy makers opted to leave both interest rate and APF quantity unchanged at 0.50% and 200 billion pounds, in line with forecasts, to boost recovery that started to gain momentum amid the austerity measures adopted by the government to tame the skyrocketing budget deficit.

Today’s rate decision was also undertaken by only eight members as the new member Martin Weale will join the committee in August’s rate decision.

The British economy has been showing improvement recently but there are fears that growth may wane amid the planned sharpest spending-cut plan in decades. Thus, eyes are on economic fundamentals to assess the performance of the economy and its major sectors.

Osborne announced additional expenditure cuts of 30 billion pounds a year by 2014-15. He said the government will cut the deficit to 20 billion pounds by 2015 to 2016.

He mentioned that ‘tighter fiscal policy can enable interest rates to stay lower for longer,’ which can boost growth along with the severs spending cut.

Today, policy makers at the BoE kept both interest rate and APF steady to boost growth and due to the rise in inflation as well.

In the first quarter, the economy grew 0.3%, following the 0.4% expansion in the fourth quarter. But there are concerns that the pace of growth might slowdown. Manufacturing eased its expansion in June to 57.5 from 58.5 in May, while services lingered at 54.4 in June.

The latest growth forecasts reveal that growth in the UK will reach 1.2% this year and 2.3% in 2011, whilst it will reach 2.8% in 2012 followed by 2.9% in 2013.

Last month the vote came 7-1, with absence of policy maker Kate Barker as her term expired on May 31, as Andrew Sentence preferred an interest rate rise to 0.75% from the current 0.50% claiming that inflation became ‘resilient’ after the recession.

Sentance mentioned that despite the unclear signs of recovery it is suitable to start the withdrawal of non-standard measures that were injected in markets in 2008 and 2009.

Inflation spiked to 3.4% in May, dropping from the highest level in 17 months in April, yet remains above the bank’s 3% upper limit.