Pound Surges Amid BoE Rate Cut Speculations

The British pound rose against the dollar as the market speculated about potential interest rate cuts from the Bank of England due to ongoing inflation concerns. Although inflation rates surpass the BoE's targets, the economy's slower growth may pressure further monetary adjustments. Analysts predict corrective fiscal measures in response.

On Thursday, the British pound climbed against the weakening dollar as market focus centered on the Bank of England's upcoming policy meeting. The BoE's approach to policy easing is under scrutiny given the higher-than-expected inflation rates.

Economists foresee inflation reaching 4%—twice the BoE's target—in the coming months. Market expectations point towards a 25-basis point rate cut, with further cuts anticipated by 2026. Jamie Searle of Citi mentioned that the MPC has shown it could surprise the market.

The BoE's current policies are contrasted with the OBR's more optimistic economic growth forecasts. Meanwhile, Finance Minister Rachel Reeves plans to introduce tax increases to stabilize finances, amid concerning construction sector performance reported earlier this week.

(With inputs from agencies.)