BOE's monetary policy to be impacted by inflation?

The Bank of England (BoE) has credibly communicated to the markets that rates will not be hiked until a steady uptrend in inflation has emerged.

In the short run, however, inflation is likely to have a less direct impact on monetary policy in the US than in the UK. Things are quite different for the Fed. In its July statement, the US central bank no longer said that commodity prices had stabilised.

"In the medium term, inflation might have an impact on the pace of the rate hikes. However, July inflation figures will be of minor importance in view of the numerous uncertainties which affect the US rate outlook. The most important uncertainty is related to China. What effect will the difficulties in China have on the global economy?", says Commerzbank. 

GBP investors could therefore take heart yesterday after the rather dovish MPC meeting two weeks ago, even though GBP-USD once again failed to cross the technical resistance at 1.57.