BoE’s Bailey Unsure About Pace of Rate Cuts, Pound Eases

The British pound has edged lower on Thursday. In the North American session, GBP/USD is trading at 1.3177, down 0.19% on the day.

The pound has been busy and moved higher on Wednesday, with gains of 0.42%. This followed massive losses of 1.1% a day earlier, after UK gilts surged to a 27-year high.

Bank of England Governor Bailey testified before the Treasury Committee hearings on Wednesday. Bailey said that he expected interest rates would continue to move “downwards gradually over time” but that there was “considerably more doubt” as to when the BoE would lower rates.

Members of the BoE’s Monetary Policy Committee are split over monetary policy. MPC member Alan Taylor, who joined Bailey at today’s hearing, said he favors four or five rate cuts a year, a much more dovish stance than Bailey. Taylor also said that the UK economy was heading for a ‘soft landing’ but was fragile.

The BoE is stuck between a rock and a hard place, as the economy is weak and could use a rate cut, but inflation has accelerated and hit 3.8%, close to double the BoE’s target of 2%. Last month, the BoE had to go through two rounds of voting before deciding to cut rates after a close 5-4 vote. The BoE meets next on September 18.

The US releases a key non-farm payroll report on Friday, ahead of the Fed meeting on September 17. The market estimate stands at 75 thousand, almost unchanged from the July gain of 73 thousand, which was well below expectations. Another weak reading would likely lead to voices calling for the Fed to deliver a jumbo half-point cut at the upcoming meeting.