British pound sinks as BOE members signal unwillingness to raise rates

Ivan Schwartz
October 18, 2017

The Bank of England's governor Mark Carney said today that inflation would keep rising a little while longer, after it was revealed this morning that the Consumer Prices Index (CPI) hit a five-and-a-half year high of three per cent.

The expected rise in rates comes despite signs that the British economy is faltering - it is growing slower than any other Group of Seven industrial economy this year - and that inflation is expected to ease back down in coming months.

"Despite continued robust growth in employment there is no sign of second-round effects onto wages from higher recent inflation", Ramsden told MPs.

Silvana Tenreyro, the LSE professor who was appointed in June to replace known MPC "hawk" Kristin Forbes, said that as spare capacity in the economy is eroded, she will be minded to vote for tighter policy. She said she might vote for a rate rise as "we are approaching a tipping point" but said she was watching the economic data closely as "rasising rates too soon would be a costly mistake".

Many economists still remained confident that Carney and co would still hike rates at their coming meeting.

Speaking to United Kingdom lawmakers in a second Parliamentary questioning session Tuesday, BOE Governor Mark Carney retained his stance on inflation.

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Mr Carney was speaking minutes after the United Kingdom inflation rate for September was revealed to be 3 per cent, the highest for five years.

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said inflation is likely to peak at 3.1% in October and return to target by late 2018, "discouraging" the Bank of England from raising interest rates a few times over the next 12 months.

The BoE is set to publish its next Inflation Report with the MPC decision on November 2.

United Kingdom inflation increased in September to the highest since early 2012, data from the Office for National Statistics showed Tuesday. Inflationary pressures have been mounting since the European Union referendum result in 2016 collapsed the value of the British pound, resulting in more expensive imports.

"The overall tone from the testimony supports our view of a rate hike in November", said Barclays after mulling the Q&A session.

Other reports by GizPress

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