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Published: Wed, October 18, 2017
Culture | By Antonia Gonzales

British pound sinks as BOE members signal unwillingness to raise rates

British pound sinks as BOE members signal unwillingness to raise rates

Mark Carney, the BoE governor, has stated his opinion that an interest rate hike is forthcoming.

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

Ramsden told the questioning Parliamentary committee that he didn't anticipate inflationary pressures would build strongly enough in the coming months, to warrant an immediate rate hike.

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. But, if there are firmer signs that inflationary pressures are building, then she would be inclined to agree with the rate hiking preference of the BOE majority.

Inflation rate climbs to 3%.

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

Data earlier on Tuesday confirmed consumer price inflation rose to 3.0% in September, with economists and the BoE expecting it to peak at 3.1% next month, while Wednesday will see crucial data on average earnings, where growth is forecast to remain subdued.

Financial markets have betted on a first hike as soon as November 2, at the end of the BoE's next policy meeting.

But the governor also said that the Bank had been right to cut interest rates in the aftermath of the Brexit vote, as this had "supported the adjustment in the economy".

However, the impact of the lower exchange rate on inflation is set to ease as the annual change of prices due to the pound's decline drops out of the comparison. That suggests investors are now less certain of a November rate hike.

If it had risen any further, Carney would have had to write to Treasury chief Philip Hammond explaining why inflation is more than a percentage point above the 2 percent target and what he and his colleagues at the central bank were going to do about it.

This may give the Bank added confidence for raising interest rates for the first time in more than a decade before the end of the year.

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