It came a day after the Fed hiked by 75 basis points and signalled rates were likely to rise more than anticipated to crush inflation, driving US bond yields and the dollar sharply higher.
Sterling fell sharply after the Bank of England decision, dropping as much as 1.7% to $1.1197. It then recouped some losses and was last down 1.5% to $1.1219.The Bank of England had been widely expected to raise borrowing costs by 75 bps today, although some analysts thought a 50 bps increase was a possibility.
In a statement, the MPC said:"Further increases in Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than priced into financial markets." Higher rates - or the expectation of them - traditionally boost a country's currency by making investments there look more attractive.
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