British pound sinks as BOE members signal unwillingness to raise rates

Pound sterling and Australian dollars

(Update:) Inflation has hit a five-year high of 3% and the question on everybody's lips is will the Bank of England raise interest rates next month?

Two new members of the Bank of England's Monetary Policy Committee cast some doubt on the likelihood of an increase in interest rates in November, though Governor Mark Carney said a hike "may be appropriate" and many economists remained confident of a hike. Inflation rose to 3 percent in September from 2.9 percent in August. The sterling was lower against the USA dollar near midday on Tuesday after Ramsden's comments, trading at $1.1765.

"Inflation rising potentially above the 3 percent level in the coming months is something we have anticipated", he told lawmakers on Tuesday.

The Bank's new deputy governor, Dave Ramsden, distanced himself from more hawkish MPC members by saying he was not close to voting for a hike.

The rise in September inflation gave additional evidence of a continuing effect from last year's sterling depreciation, as much of the rise came in those components of the CPI that are especially sensitive to movements in the exchange rate.


"My view is that we are approaching a tipping pint at which it would be necessary or justified to remove some of that stimulus", she said.

BOE deputy Governor Dave Ramsden was answering United Kingdom lawmaker's questions in a parliamentary committee, alongside new external BOE policy setting member, Silvana Tenreyro. Carney has previously said he is part of that majority.

'We believe the ability of the Bank of England to enter a rate rising cycle is severely limited by the slowing growth we are seeing in the UK. She added that a premature rate hike could prove more costly to the economy than an early rate cut.

Consumer spending figures due out today are expected to reflect a continued upward trend in inflation.

He said the cut in interest rates implemented immediately after the European Union referendum result was the right thing to do to secure economic growth, but that the "trade off" between protecting against higher inflation and securing economic growth has changed, to the point where a rate rise would be unlikely to hamper growth, but could ease inflationary pressure.

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