The United States may be undervalued, a new analysis suggests, prompting a correction in U.K. inflation forecasts.
The Bank of England said on Tuesday it will begin a series of rate cuts in the coming months that will lower the rate it pays on all U.T.E. assets, including the pound, and its currency.
The U.N. body has been trying to cut rates in an attempt to help stabilize the global economy, which has slowed sharply in the last few years amid a global recession.
The central bank last month announced it was cutting its benchmark interest rate to 0.75% from 0.8%, and it said it would also gradually begin to raise interest rates on its own currency.
“There is a risk that the rate cut will lead to further deterioration in U to U denominated exchange rates, especially given that it would raise inflation expectations and further strain financial conditions,” the Bank of Britain said in a statement.
The Fed has been cutting interest rates in a bid to slow the economy, but some economists say it’s not enough.
The BoE cut its key rate from 0% to 1.25% in January.
It said it was not going to cut its benchmark rate any further and would not be hiking it.
It has also begun to cut the overnight lending rate, which measures how quickly banks lend money to customers.
The pound fell 0.7% against the dollar on Tuesday, while the euro hit a fresh record high against the yen, its biggest gain since October.