Clarke rate hint confuses City

Kenneth Clarke caused confusion in the financial markets after his monthly meeting with Eddie George, Governor of the Bank of England, yesterday.

By appearing to give a hint that he had decided to raise interest rates, the Chancellor sent the pound soaring. But by the end of the day it looked almost certain that base rates would not be changed and investors pushed the FTSE 100 index up 20 points to a record 4,281.

The Treasury insisted that nothing could be read into the Chancellor's remarks yesterday. In a lunchtime television interview, Mr Clarke said: "Eddie will announce the decision in due course."

He continued: "Wait to see the minutes and then you'll see the sensible discussion which Eddie George and myself have had."

According to the Treasury, the Chancellor was merely referring to the fact that although he takes the interest rate decisions, the Bank decides when and how to implement them. But the City was confused.

"By and large the Bank does not say anything unless something is going to happen," said David Mackie, UK economist at JP Morgan. However, the Bank did not signal a change in rates yesterday afternoon.

"This is a strong, but not conclusive, hint that nothing has happened," said Mr Mackie, though confirmation must wait for the Bank's money market operations this morning.

Even so, the pound held on to its earlier gains. It climbed by just over 2 pfennigs to reach DM 2.6905, and by more than a cent to $1.6322, yesterday. Thanks to the weakness of the yen, sterling also broke through the psychologically important 200 level, its highest for four years.

Most analysts would be amazed if Mr Clarke does turn out to have given the go-ahead for an interest rate increase. Rates have risen on only two occasions during the six months before a general election - in 1955 and 1979.

Across the Atlantic, as most analysts had expected, the Federal Reserve left US interest rates unchanged after its two-day policy meeting. But Michel Camdessus, managing director of the International Monetary Fund, warned the Fed needed to be vigilant against inflation.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk