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STERLING SURGE

Pound jumps against dollar and euro as Bank of England split over immediate interest rate rise

Soaring inflation pushed three members of the Bank of England's Monetary Policy Committee to vote for rate rise

The pound has surged against the dollar and the euro after the Bank of England’s Monetary Policy Committee (MPC) appeared split over the latest interest rate decision.

Interest rates were left unchanged at 0.25 per cent but soaring inflation pushed three members of the MPC to vote for rate rise.

 The surprise split decision caused the pound to jump half a cent to a high of $1.2795 against the dollar before losing some ground
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The surprise split decision caused the pound to jump half a cent to a high of $1.2795 against the dollar before losing some groundCredit: Investing

The vote was the closest the MPC came to support a rate rise since 2007.

A weaker pound since the Brexit vote has pushed up the price of importing goods, and are now passing the cost on to regular Brits.

The cost of living increased to 2.9 per cent in May – a new four year high – which can be combated by higher interest rate.

The surprise split decision caused the pound to jump half a cent to a high of $1.2795 against the dollar in the immediate aftermath of the policy release.

It then lost some ground to stand at $1.2766 against the dollar.

Against the euro, it climbed 0.7 per cent to 87.27p per euro.

Richard Berry, founder of the currency specialists Berry FX, said sterling response was worthy of a “cat on a hot tin roof”.

“As the dust settles, the markets are recalibrating to the idea that an interest rate rise could be coming, and soon,” he added.

How to get the best holiday money rate

WE spoke with Hannah Maundrell, editor-in-chief at money.co.uk to find out how you can guarantee the best rate:

  • Don’t buy cash at the airport – you’ll always be able to beat the rate with a bit of forward planning
  • Compare travel money companies online  Factor in delivery costs and choose the option that gives you the most cash to spend on holiday. If you’ve left it until the last minute order online for airport collection so you get the best of both worlds.
  • Use comparison tools – MoneySavingExpert’s TravelMoneyMax enables you to compare pick-up and pre-order rates.
  • Don’t pay for travel money with a credit card – it’s likely you’ll be charged a cash withdrawal fee which adds to the cost.
  • Top up a prepaid card to lock in your rate now – Choose your card and read the T&Cs carefully as some apply hefty fees. WeSwap, FairFX and Caxton FX are all worth checking out.
  • Always choose to pay in the local currency rather than sterling – This will help you avoid sneaky exchange fees

Berry added that there has clearly been a sea change on the MPC.

“While deep questions remain about the impact this will have on an economy that has become hooked on record-low interest rates, for now Poundwatchers are making hay as sterling enjoys a sustained relief rally,” he said.

The Bank's decision pushed the London FTSE 100 share index down further by 1.2 per cent at 7,385.7.


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