Pound Slips Before Rebound as BoE Keeps Rates Unchanged Amid Energy Worries

The Pound to Euro exchange rate rebounded to around 1.1650 after dipping to two-week lows near 1.1620 following the Bank of England's decision to keep interest rates unchanged at 3.75%. The BoE's vote was a 6-3 split, with Mann, Greene, and Pill voting for a 25 basis-point hike.

Policymakers seem reluctant to tighten monetary policy further, but high energy prices are reducing their room to wait. Investment banks such as Barclays and MUFG now forecast a November rate hike, while Danske Bank still expects rates to remain unchanged until June 2027.

Rabobank believes the BoE would prefer to keep rates on hold for as long as possible but will eventually need to increase them if energy prices continue to rise. The bank predicts a 25 basis-point hike to 4.00%.