Sterling slide is `just a wobble' says Governor oveyr 2


Economics Correspondent

The British economy is slowing to a sustainable pace, and sterling's recent weakness is ``essentially a wobble'', according to Eddie George, Governor of the Bank of England. His comments cemented the City view that there will be no rise in base rates at next week's monetary policy meeting.

Speaking in Helsinki, where he is visiting the Bank of Finland, Mr George said: ``We're seeing some signs that the economy is slowing down from a pace that was clearly unsustainable to a more sustainable pace.''

The Governor pointed out that the underlying rate of inflation was still low but was above its trough of about 1.25 per cent.

This modest upturn in inflation was the reason for the three increases in base rates since September - to the present level of 6.75 per cent - which he described as a ``not insignificant tightening'' of policy."

Home-grown inflation pressure was ``pretty modest'' and the main short- term influences on inflation came from abroad, Mr George said. But he downplayed sterling's 4 per cent fall since January.

The pound had fallen as a side-effect of the weakness of the dollar. Short-term influences, including the British political situation, had also played a role. Mr George said: ``We have been drawn in a bit to the general turmoil.''

The financial markets read the comments as a bid to damp down expectations of a further increase in interest rates before the next meeting between Mr George and Kenneth Clarke on April 5.

Gerard Lyons, chief economist at DKB International (the securities arm of one of the major Japanese banks) said: ``The Governor wants to stop us all from trying to double-guess policy moves.''

In minutes of the February meeting between the Chancellor and the Governor, published last week, Mr George emphasised market pressures as the reason for raising base rates at once rather than waiting.

Some analysts concluded that market conditions had moved up the list of factors influencing monetary policy and some have also noted that the pound's fall this year is equivalent to 1 per cent off interest rates.

Mr George ruled out sterling's early return to the European exchange rate mechanism. He said monetary union could happen this decade but he thought that unlikely.

There was a danger of political aspirations running ahead of economic reality, he said, but meanwhile the Maastricht convergence criteria were a very sensible guide to policy.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific