Living abroad? What does the Bank of England rate decision mean for you?


The Bank of England’s announcement caused the pound to drop 0.5 per cent against major currencies

While the BoE did not make any changes to policy at this juncture, its attitude to the UK’s economic outlook had an impact on the pound.

If you are living abroad and moving money to and from the UK, the exchange rate you are able to secure for your transfers makes a massive difference to how much you actually receive.

So, how could you be effected by the latest BoE rate decision and the movement in GBP exchange rates it triggered?

The BoE slashed interest rates to record lows in order to help the UK deal with the fallout from the global economic crisis in 2008, and they have barely moved in almost ten years.

While this is great news for borrowers, it has not been great news for savers.

After the UK voted to Brexit, concerns that the economy could be tipped into recession saw the BoE cut borrowing costs once again. 

However, in the almost 12 months since the EU referendum the domestic economy has shown remarkable resilience and defied all the gloomiest forecasts.

The post-referendum depreciation in the pound has also led to a massive spike in inflation.

The stimulus isn’t excessive, it’s appropriate

Bank Of England boss Mark Carney

As rising inflation would typically inspire the BoE to hike interest rates, the uptick in consumer price pressures has left many speculating that borrowing costs could be increased in the near future, and this speculation has been supporting the pound.

However, although the BoE’s Monetary Policy Committee (MPC) voted 7-2 against a rate increase (with two members now pushing for a rate hike) their comments about wage growth, inflation and the future path of stimulus quashed rate hike expectations and left the pound weaker.

Mark CarneyGETTY

Bank of England Govenor Mark Carney claimed the move was not ‘excessive’ but ‘appropriate’

The minutes from the meeting said; “The continuing suitability of the current policy stance depends on the trade-off between above-target inflation and slack in the economy, as well as the prospects for inflation to return sustainably to target.

“These projections depend importantly on three main judgements: that the lower level of sterling continues to boost consumer prices broadly as projected, and without adverse consequences for inflation expectations further ahead; that regular pay growth remains modest in the near term but picks up significantly over the forecast period; and that more subdued household spending growth is largely balanced by a pickup in other components of demand.”

BoE Governor Mark Carney was questioned about whether the current level of stimulus is required in light of how well the UK has been holding up in the face of Brexit uncertainty.

The central bank chief said: “The stimulus isn’t excessive, it’s appropriate, first point, and that’s the judgement of the committee.”

The pound subsequently dropped by over 0.5 per cent against most the major currencies, taking it away from its recent multi-month highs.

If you live abroad and need to move money from the UK to your host nation, the depreciation in the pound means that you would get less for your currency transfer now than you would have before the BoE announcement.

The more money you have to move, the more difference the decline will make to you.

For example, GBP/AUD fell from a high of AU$ 1.763 to a low of AU$ 1.743. On a transfer of £150,000 this would mean the difference of AU$ 3,000.

Exchange rateGETTY

A weak pound means you get less for your money while abroad

While the pound is currently weaker it could climb over the next few months if more members of the MPC start voting for an immediate rate hike.

If you’ve got currency transfers to manage and are worried about the potential impact of BoE rate decisions, sign up to receive market updates from a reputable provider so you have access to all the information you need to plan your transfers effectively.

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