The GBP/USD currency pair gained for a third straight trading day on Wednesday ahead of the outcome of the Bank of England’s and the Federal Reserve’s policy meetings.
The Bank of England is expected to leave its benchmark interest rate intact at 3.75% at its March 19th meeting.
BoE’s February decision to hold rates was a narrow 5 to 4 vote, as officials weighed easing inflation pressures against risks stemming from a weakening economy. Four members voted in favor of a 25 basis point cut, which highlighted growing divisions within the Monetary Policy Committee.
BoE policy makers said that risks of persistent inflation had decreased, while weaker demand and a softening labor market posed downside risks.
The MPC indicated that further rate cuts were likely, but they would depend on incoming inflation figures. BoE Governor Andrew Bailey expressed confidence that inflation would reach the 2% target sooner than previously thought.
Meanwhile, the Federal Reserve is largely expected to leave its federal funds rate target range intact at 3.50%-3.75% at its March 17th-18th meeting, following three successive rate cuts last year.
In January, FOMC policy makers highlighted that economic activity had been expanding at a solid pace, job growth had remained slow, while inflation had remained somewhat elevated.
The minutes from the Federal Reserve’s January meeting showed that FOMC officials were divided over the future trajectory of interest rates. Several policy makers signaled that further rate cuts would likely be appropriate in case inflation continued to subside in line with their projections.
Others said that it might be prudent to keep the policy rate on hold for some time. Some FOMC members even argued that rate hikes could become necessary in case inflation remained elevated.
Investors will also be paying close attention to the press conference with Fed Chair Jerome Powell for clues over the timing of future interest rate cuts as well as to the new set of FOMC economic forecasts.
The GBP/USD currency pair was last up 0.11% on the day to trade at 1.3363.
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