GBP Drops Amid BoE Decision, Interest Rates Kept Steady

The British Pound (GBP) declined against its major currency peers following the Bank of England's (BoE) monetary policy decision. The GBP/USD pair dropped from an intraday high of 1.3405 to near 1.3380, with a slight initial positive reaction.

The BoE kept interest rates steady at 3.75%, as expected, but the number of Monetary Policy Committee (MPC) members voting for a hold was lower than anticipated - six out of nine, instead of seven. Three MPC members favored an interest rate hike of 25 basis points (bps), including Catherine Mann, Chief Economist Huw Bill, and Megan Greene.

The BoE warned that the energy shock would maintain elevated volatility surrounding economic growth and potentially lead to second-round inflation shocks if it persists. However, the central bank is prepared to act as necessary to ensure that inflation remains on track to meet the 2% target in the medium-term.