Sterling slide is `just a wobble' says Governor oveyr 2
Tuesday 28 March 1995
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.
- 2 Top Gear: Jodie Kidd, Philip Glenister and Guy Martin 'in advanced talks' to join show
- 3 General Election 2015: 14-year-old boy asks Nick Clegg – 'can you kill Katie Hopkins?'
- 4 University student in court for allegedly covering housemates' food in window cleaner and spit
Italian police 'reveal' what Jesus looked like as a young boy
Mysterious 'X-Files' sounds heard miles above the Earth
University student in court for allegedly covering housemates' food in window cleaner and spit
Garland shooting: Isis claims attack on Prophet Mohamed cartoon contest in Texas as its first action on US soil
Met Gala 2015: Beyoncé manages to out-skimp Rihanna, Miley and Kim Kardashian combined with near-naked ensemble
In defence of liberal democracy
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
Andy McSmith's Sketch: Feisty audience is the real star of an enlightening show
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...