The dollar weakened to its lowest level against the pound since 12 January following the surprise decision by Ben Bernanke’s Federal Reserve not to taper its massive $85 billion a month stimulus programme. In his latest monthly policy announcement, Bernanke said that the economic data since June did not support a cut in the bond purchase program. Bernanke also confirmed that any future move would depend on future economic data.
To back up their decision, the Fed decided to cut its growth forecast for the US economy.
Earlier on in the day, the minutes of the Bank of England's (BoE) Monetary Policy Committee meeting from the beginning of the month showed that policy makers were unanimous in their decision to keep the benchmark interest rate unchanged at 0.5% and the size of the asset purchase program at £375 billion.
The minutes showed the nine MPC members voted 9-0 for a ‘no change’ policy on both UK interest rates and asset purchases.
The detail of the minutes showed however that some committee members still feel more stimulus might be needed at some point, “based in part on their judgements about the speed with which the degree of slack in the economy might be reduced if the momentum in demand continued to grow”. Their main concerns seem to be centred on any further emerging markets and/or euro zone weakness.
Meanwhile, Chancellor George Osborne said yesterday that he was not inflating a UK housing bubble despite official data showing that on average, UK property prices have broken through their pre-crisis peak. In a speech to the Institute of Directors at their annual conference, Osborne said that there was no housing boom under way even though the official data from the Office for National Statistics showed the average price of a UK house has now surpassed its peak of five years ago of £245,000.