Investing.com - The pound fell to the days lows against the dollar on Thursday after the Bank of England left interest rates on hold at current record lows and warned that living standards will fall this year as the headwinds from Brexit mount.
GBP/USD was down 0.61% to 1.2863 by 11.40 GMT from around 1.2919 ahead of the announcement.
The BoE’s Monetary Policy Committee voted 7-1 to keep rates on hold at a record low of 0.25%, in line with economists’ expectations.
Kristin Forbes, who is due to leave the BoE in June, cast the sole vote in favor of raising borrowing costs to 0.5%. The other seven members of the MPC opted to keep rates steady.
The committee voted unanimously to make no changes to its bond-buying stimulus program, in line with economists’ expectations.
The MPC was one member short, with Charlotte Hogg still to be replaced after resigning last month following her failure to disclose that her brother works for Barclays, which is regulated by the BoE.
The bank trimmed its forecast for growth for this year, saying it now expected economic growth of 1.9%, down from 2.0% three months ago. It raised its growth forecast for 2018 to 1.7% up from 1.6% in February.
The bank now expects inflation to be 2.7% this quarter, up from the 2.4% rate it forecast in February. It said inflation would continue to rise further above its 2% target in the coming months, “peaking a little below 3% in the fourth quarter.”
The bank warned that living standards will fall this year, cutting its forecast for average earnings growth for 2017 to 2% from 3% expected in February.
The minutes noted that its forecasts are based on Britain achieving a ‘smooth’ Brexit.
The BoE also warned that it might have to raise interest rates faster than the market thinks if inflation continues to overshoot its target.
"If the economy follows a path broadly consistent with the May central projection, then monetary policy could need to be tightened by a somewhat greater extent over the forecast period than the very gently rising path implied by the market yield curve underlying the May projections," the minutes said.
Sterling was at session lows against the euro, with EUR/GBP rising 0.62% to 0.8449 from around 0.8415 earlier.