European session review: GBP gains after BoE’s monetary policy update

GBP continued to trade higher against most of its major rivals in the European session on Thursday after the announcement of the outcomes of the Bank of England's (BoE) latest monetary policy meeting.

At their August gathering, the BoE's policymakers decided to keep the bank rate unchanged at 0.10% and maintained the asset purchase program at GBP895 billion, as widely expected. 

In the latest monetary policy report, however, the British central bank revealed that its Monetary Policy Committee (MPC) intends to begin to reduce the stock of purchased assets when “Bank Rate has reached 0.5%, if appropriate given the economic circumstances, by ceasing reinvestments of maturing UK government bonds”. It was also noted that “the MPC will also consider beginning to sell actively some of the stock of purchased assets only once Bank Rate has risen to at least 1%”. The BoE’s previous guidance stated that it will not start to unwind its QE and would reinvest the proceeds of maturing gilts, until the Bank Rate reaches 1.5%. This was the only noticeable change in BoE’s policy statements. 

Besides that, the Bank reassured that the above-target CPI inflation is expected to be temporary and said it continued to see the UK's economy to grow by 7.25% this year, unchanged from its May forecast.