During the press conference, Bailey pointed out recent inflation data, which prompted policymakers to raise rates by only 25 basis points, clarifying that it does not mean the regulator will halt rate increases. Notably, the US Federal Reserve and the European Central Bank had already signaled the possibility of ending their aggressive policies a week earlier. "I'm being more cautious because, frankly, we are still seeing some surprises in the news, and I think we need to get ourselves onto a more settled path," Bailey said.
The Monetary Policy Committee voted 6 to 3 in favor of raising rates by a quarter point, marking the 14th consecutive increase. Two committee members wanted a 50-basis-point rate hike, while one voted for no change. In June, policymakers voted 7 to 2 in favor of a 50-basis-point rate hike as a response to stubborn inflation and robust labor market indicators. "We've seen some quite big surprises in recent months," Bailey said, citing "frankly unwelcome surprises" in June.
Since then, inflation has shown signs of cooling. The overall consumer price inflation declined to 7.9% in June from a higher-than-expected 8.7% in May. However, core inflation, which excludes volatile prices of energy, food, alcohol, and tobacco, remained unchanged at 6.9% on an annual basis, only slightly lower than May's reading of 7.1%.
Bank of England also updated its inflation forecast, stating that it now expects prices to drop to 4.9% by the end of this year, a faster decline than anticipated in May. The report also mentioned that inflation will return to the target of 2% only in 2025.
Regarding future regulatory steps, Bailey noted that policymakers would continue to rely on actual data, emphasizing that there were numerous possible paths to achieving the target.
As for the GBP/USD pair, the pressure on the pound eased after the Bank of England's decision, and the situation is now relatively stable. Counting on strengthening can only happen after gaining control above 1.2735, which still needs to be reached. A return to this level may reinforce hope for a recovery toward 1.2780, after which a more significant upward move toward 1.2840 can be considered. In case of a decline in the pair, bears are likely to attempt to take control below 1.2680. If they succeed, this may strike a blow to bullish positions and push the GBP/USD pair towards the low of 1.2630 with a prospect of reaching 1.2590.
Regarding the EUR/USD pair, the pressure on the euro has intensified. Bulls need to climb above 1.0960 to maintain control of the market. This may pave the way to 1.1015. From this level, a move to 1.1060 is possible, but doing so without support from big traders will be quite challenging. In case of a decline in the trading instrument, large buyers may return to the market near 1.0910. If no support is seen there, it would be good to wait for an update of the low at 1.0870 or open long positions from 1.0835.