Pound jumps against dollar and euro during Queen’s Speech as BoE chief economist hints at rate rise
Bank of England's chief economist Andy Haldane says he is likely to change his vote in the coming months
THE POUND jumped against the dollar and the euro after the Bank of England’s chief economist said he was likely to back an increase in interest rates later this year.
In a speech published on Wednesday, Andy Haldane, who voted to keep rates unchanged last week, said he was likely to change his vote in the coming months.
"Provided the data are still on track, I do think that beginning the process of withdrawing some of the incremental stimulus provided last August would be prudent moving into the second half of the year," he said.
The pound recouped from previous losses following the Queen's Speech.
It then spiked by more than 0.4 per cent to $1.27 following Haldane's comments, which were released just after.
It also gained 0.3 per cent against the euro to trade at 87.86p per euro.
Earlier on Wednesday, the pound was trading at below $1.26 against the US dollar - its lowest level since April 18, when Theresa May called the snap election.
The fall came after the pound dropped to a one-week low against the dollar on Tuesday, following a speech by Mark Carney yesterday in which he dashed hopes of rate rise.
“I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations,” Carney said .
The Bank of England’s Monetary Policy Committee (MPC) voted to keep the interest rates unchanged at 0.25
per cent last week but soaring inflation pushed three members of the MPC to vote for rate rise.
The vote was the closest the MPC came to support a rate rise since 2007.
A weaker pound since the Brexit vote has pushed up the price of importing goods, and are now passing the cost on to regular Brits.
The cost of living increased to 2.9 per cent in May – a new four year high – which can be combated by higher interest rate.
The pound remains around 14 per cent lower against the dollar since last June’s Brexit referendum.
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