Pound Rises as BoE's Rate Cut Sparks Inflation Concerns

The Bank of England's recent interest rate cut led to a rise in British bond yields, boosting the pound. However, inflation concerns among policymakers are causing markets to anticipate fewer rate cuts. Governor Andrew Bailey acknowledged uncertainty about future rate paths, particularly amidst Britain's weakening job market and rising inflation.

The pound surged and British bond yields rose after the Bank of England implemented another interest rate cut, fueling concerns over inflation among its policymakers. This move has led markets to reduce their expectations for future cuts, with heightened uncertainty surrounding the BoE's rate trajectory.

The Monetary Policy Committee's decision to enact a 25 basis point rate cut, following a unique two-vote requirement, underscores the divide within the committee. Four out of nine policymakers chose to keep rates steady, highlighting a growing focus on combating inflation, which is projected to peak at 4% soon.

Governor Andrew Bailey underscored the uncertainty in future rate directions, citing Britain's slowing job market and inflation rise. Despite the currency strengthening against the dollar and euro, market watchers are reconsidering positions on the pound due to potential changes in BoE easing following the split vote.

(With inputs from agencies.)