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The Pound<\/a> Sterling (GBP) trades a quarter of a percent lower on Thursday in\u00a0the 1.2680s\u00a0against the US Dollar (USD), after\u00a0the Bank of England (BoE) policy meeting, a key event for GBP pairs.\u00a0<\/p>\n The Pound Sterling continues falling after the BoE publishes<\/a>\u00a0its policy decision on Thursday. The BoE<\/a>, which sets interest rates in the UK, left its policy intererst rate unchanged at 5.25% at the meeting. The decision was agreed by a vote of 7 for a hold, and 2 for a cut, the same as the previous meeting.\u00a0<\/p>\n The accompanying statement<\/a>, however, said the decision was “finely balanced” suggesting there had been a fair risk the BoE would cut rates instead.\u00a0<\/p>\n The BoE mentioned\u00a0the August decision and how new information “affects the assessment that the risks from inflation persistence are receding”, which was a hint the bank could be planning \u00a0to\u00a0cut interest rates in August, according to Yohay Elam, Product Manager\u00a0at FXStreet<\/a>.\u00a0<\/p>\n Higher interest rates tend to appreciate the Pound by attracting more foreign capital inflows; the opposite is true of lower interest rates. The decisions of the BoE, therefore, heavily impact the Pound.\u00a0<\/p>\n Downside for the Pound Sterling is likely to remain capped, however, by the BoE’s\u00a0inflation forecast<\/a> for\u00a0H2 which it sees\u00a0rising up to 2.5% YoY.\u00a0<\/p>\n The decison was in line with the market consensus which was for no rate cuts and a 7-2 split in the voting, with 2 favoring a cut. It is very rare for the BoE to change interest rates during an election campaign. BoE Governor Andrew Bailey himself said a rate cut at the meeting could be, \u201cneither ruled out nor a fait accompli\u201d.\u00a0<\/p>\n Despite UK Consumer Price Index (CPI) inflation data showing a fall to the BoE\u2019s 2.0% target in May, higher inflation in other pockets of the economy continue to keep policymakers wary of cutting, with a first rate cut not likely until August.\u00a0<\/p>\n \u201c\u200b\u200bOver in the UK, there was another important milestone yesterday, as CPI inflation fell exactly in line with the Bank of England\u2019s target, reaching +2.0% in May as expected,\u201d says Jim Reid, Global Head of Macro Research at Deutsche Bank. \u201cHowever, some of the details of the report were less favorable, as core CPI was higher at +3.5%, while services inflation surprised on the upside at +5.7% (vs. +5.5% expected), and that\u2019s one of the stickier categories. As a result, investors dialed back the chance that the Bank of England<\/a> would cut rates by the August meeting, with the chance falling from 52% to 34% by the close.\u201d<\/p>\nPound Sterling weakens after BoE decision\u00a0<\/h2>\n