Following the Federal Reserve’s decision to keep policy steady, 30-year bond yields rose while short-end rates fell, pushing the USD lower. The move in asset prices came as markets questioned the Fed’s inflation-fighting resolve after the meeting. Attention now turns to the Bank of England, where steady rates are widely expected, although the Bank may use hawkish rhetoric to keep expectations alive for one or two rate rises over the next six months.
Monetary Policy Outlook And Possible MPC Dissents
The BoE could also see dissents in the MPC in favour of an immediate change, even as some watchers expect policy to remain unchanged this year. The Bank’s stance will depend on its reading of second-order price effects, which it described in June as a “material risk” in wage and price setting.
Sterling Projections And Inflation Risks
In the near term, markets may continue to price tightening, and further UK labour-market stabilisation or a renewed rise in UK CPI inflation from July could intensify pressure. Over a one-to-three-month horizon, GBP/USD is seen trading around 1.32–1.33, while longer-term fiscal concerns alongside steady rates may weigh on sterling.
