Sterling Pressured On Reluctant BoE Policy Decision

The Pound Sterling seems under pressure due to the Bank of England’s reluctance to raise interest rates further. The current policy is considered restrictive, and further hikes could make the economic outlook vulnerable.

The UK services sector is shrinking after six months of expansion, and policy divergence between the BoE and the Federal Reserve is likely to persist if the central bank decides to pause the policy-tightening spell.

The UK services PMI showed a contraction in August for the first time since January. The Pound Sterling oscillates below the psychological support of 1.2500, with Bank of England Governor Andrew Bailey questioning further policy tightening.

The UK economy has the highest inflation rate among the G7 economies, and comments about a steady interest rate policy could elevate consumer inflation expectations. The cooling effects of higher interest rates are impacting spending and confidence from both households and corporations in the UK.

Uncertainty over the monetary policy meeting scheduled for September 21 has increased, and the market remains cautious due to rising interest rates by Western central banks.