Could the BoE hold following unexpected inflation drop?

Daily Currency Update

The Bank of England is at a critical juncture as it contemplates its decision on interest rates following an unexpected drop in UK inflation last month. Financial markets are now speculating that the central bank might maintain borrowing costs at their current levels for the first time in nearly two years.

In a pivotal week for the economy, the Office for National Statistics released August data on Wednesday, prompting financial markets to assign a greater than 50% probability that the central bank will refrain from adjusting interest rates when it meets on Thursday.

Last month, the annual inflation rate in the UK decelerated to 6.7%, primarily due to subdued growth in food prices and monthly declines in hotel and air travel expenses.

Today, the Bank of England is set to announce its interest rate decision. The prevailing expectation is that the BoE will implement a 0.25% increase, marking the 15th consecutive interest rate hike. Nevertheless, there is a possibility that Governor Andrew Bailey might hint at the conclusion of this rate-raising cycle, a scenario that could potentially lead to a depreciation of the GBP.