The Bank of England Governor, in his Mansion House speech on Tuesday, said that “now is not yet the time” to begin tightening monetary policy. Sterling immediately sold off and trended lower throughout the rest of the day, ending up around $1.2615 late afternoon, having earlier in the session been above $1.275.
At the Bank’s policy meeting last week, three out of the eight voting members on its Monetary Policy Committee (MPC) unexpectedly voted to raise interest rates this month.
“Different members of the MPC will understandably have different views about the outlook and therefore on the potential timing of any Bank rate increase. But all expect that any changes would be limited in scope and gradual in pace,” Mr Carney said.
“From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment,” he added.
Figures earlier this month showed that inflation had jumped unexpectedly to 2.9 per cent in May, its highest level in nearly four years, as a result of the slump in the pound since last year’s Brexit vote.
Rising inflation is already outstripping average wage increases, squeezing living standards.
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