BoE Rate Decision Weighs on Pound as Yen Strengthens Ahead of BOJ Meeting

The British Pound weakened against the Japanese Yen on Thursday after the Bank of England's monetary policy announcement. The BoE left its policy rate unchanged at 3.75% in a 6-3 vote, matching market expectations.

Chief Economist Huw Pill and external members Megan Greene and Catherine Mann voted for a 25-basis-point increase to 4.00%. In its statement, the central bank warned that inflation risks are tilted to the upside due to higher energy prices linked to the war in the Middle East.

The BoE said monetary policy is being set to ensure that inflation returns sustainably to the 2% target as the economy adjusts to the energy shock. However, policymakers also noted that there has been little evidence so far of significant second-round effects on domestic prices and wages.

Governor Andrew Bailey kept the door open to future rate hikes, saying, 'If the conflict in the Middle East persists for an extended period, as appears to be the case, and the risk of second-round effects emerging increases, it is likely that policy may have to tighten.'