September 2024 Currency Market Review: Bank of England Holds Rates as Inflation Remains Above Target

September 2024 saw global currency markets respond to steady policy from the Bank of England and other major central banks, as inflationary pressures persisted above official targets. The pound, dollar, euro, and yen all reflected a cautious market tone, with participants closely watching central bank guidance and economic data.

British Pound (GBP)

The Bank of England’s Monetary Policy Committee (MPC) met on 18–19 September 2024 and voted by a majority of 8–1 to maintain the Bank Rate at 5.0%. One member preferred to reduce the rate to 4.75%. The Committee also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes by £100 billion over the next 12 months, to a total of £558 billion.

The decision to hold the rate followed a period of mixed inflation data. While headline inflation had fallen from its peak, it remained above the Bank’s 2% target. Core inflation, which excludes volatile food and energy prices, had edged up to 3.6% in August. The MPC highlighted ongoing uncertainty in the economic outlook, with subdued growth and persistent price pressures, particularly in services and wages. The Bank reiterated its commitment to a data-dependent approach, with markets expecting clearer direction after the autumn budget and further economic releases.

Sterling remained range-bound, with investors awaiting further signals on the timing of any future rate adjustments.

US Dollar (USD)

The US Federal Reserve did not hold a policy meeting in September 2024. The federal funds rate remained at 5.25% to 5.5%. Market participants continued to monitor US inflation and labour market data, with the Fed signalling a cautious approach to any future policy moves.

Euro (EUR)

The European Central Bank (ECB) did not hold a policy meeting in September 2024, having left rates unchanged at its previous meeting. Eurozone inflation remained above target but was on a gradual downward trend. Business sentiment and PMI surveys signalled ongoing economic challenges, but with some signs of stabilisation. The euro traded in a narrow range, reflecting the ECB’s prudent stance.

Japanese Yen (JPY)

The Bank of Japan (BoJ) did not hold a policy meeting in September 2024. The BoJ maintained its ultra-loose monetary policy stance, keeping its short-term policy rate unchanged. Japanese inflation data showed price growth near the BoJ’s target, while machinery orders and other indicators pointed to modest improvement. The yen remained sensitive to global risk sentiment and speculation about future policy moves.

Key Economic Events and Releases in September 2024

Central Bank Actions:

• Bank of England: MPC meeting on 18–19 September, Bank Rate held at 5.0% (8–1 vote), further reduction in government bond holdings announced

• US Federal Reserve: No meeting, rates unchanged at 5.25% to 5.5%

• European Central Bank: No meeting, rates unchanged

• Bank of Japan: No meeting, rates unchanged

Major Data Releases:

• UK: CPI inflation remained above target, core inflation at 3.6% in August, labour market, GDP and retail sales updates

• US: CPI inflation, labour market data, retail sales

• Eurozone: CPI inflation, business sentiment, PMIs

• Japan: Inflation, machinery orders, GDP

Outlook

September 2024 reinforced the theme of central bank caution amid persistent inflation and subdued growth. With the Bank of England holding rates and continuing to reduce its balance sheet, markets looked ahead to the November MPC meeting and the autumn budget for clearer policy direction. The pound, dollar, euro, and yen all traded in response to evolving expectations, with attention turning to upcoming economic releases as the year progressed.