BoE Maintains a Firm Stance: Rates Expected to Stay High for an Extended Period

GBP: BoE to keep rates high for 'sufficiently long'

"Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term" should be the key phrase to look out for in today's Bank of England (BoE) policy statement. The Bank Rate is widely expected to be left unchanged at 5.25%. The focus will also be on the vote split. 6-3 would seem to be the most likely as James Smith explains in our BoE preview. 

Assuming that the BoE does not soften its tone today – i.e., it does not provide fresh ammunition to pricing of rate cuts next year – we would expect sterling to stay relatively well supported. This could see GBP/USD push up the 1.2250 area, while EUR/GBP could press support at the 0.8670/80 area.