The pound briefly touched the days highs on Thursday, before turning lower after the Bank of England left interest rates on hold, but said that “ongoing tightening” was likely to be needed, cementing expectations for a rate hike in May.
Two of the BoE’s nine member monetary policy committee voted in favor of a rate hike at today’s meeting, but Governor Mark Carney and the other members of the committee argued it would be better to wait for updated economic forecasts in May.
GBP/USD was at 1.4146 by 08:22 AM ET (12:22 GMT) after initially rising as high as 1.4216.
At its last meeting in February the bank surprised markets by saying that rates would need to rise faster than expected as strong global growth boosted the UK economy.
The bank said Thursday that recent economic developments backed up this assessment.
“Given the prospect of excess demand over the forecast period, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a more conventional horizon,” the bank said in its statement.
“All members agreed that any future increases in Bank Rate were likely to be at a gradual pace and to a limited extent.”
The pound remained higher against the euro, with EUR/GBP down 0.22% at 0.8705 from around 0.8700 earlier.