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Pound Hits Highest as BoE Backs Rate Rise

Pound Hits Highest as BoE Backs Rate RisePound Hits Highest as BoE Backs Rate Rise

The pound has hit its highest level against the dollar since the Brexit vote after a senior Bank of England official fuelled speculation it could raise rates in the coming months.

Gertjan Vlieghe, who has previously argued against a rate rise, said the “moment is approaching” when interest rates might need to go up. The bank kept rates at 0.25% this week, but hinted at a rise in the future, BBC reported.

Sterling rose more than 1% against the dollar to hit $1.361. That was its highest level since June 24, the day after the Brexit vote. The pound also gained more than 1% against the euro to rise above €1.13.

Analysts have suggested the bank could lift interest rates back to 0.5%, the level they were before the EU referendum, as soon as November.

In a speech on Friday, Vlieghe said: “Until recently, I thought the appropriate response of monetary policy was to be patient, given modest growth and subdued underlying inflationary pressure. But the evolution of the data is increasingly suggesting that we are approaching the moment when bank rate may need to rise.”

Vlieghe, who was the first bank member to vote for a rate cut after the Brexit vote, said there was now growing evidence the UK economy was picking up. He pointed to unemployment falling to record lows, as well as signs that households are spending more and that wages are rising in the private sector.

“If these data trends of reducing slack, rising pay pressure, strengthening household spending and robust global growth continue, the appropriate time for a rise in bank rate might be as early as in the coming months,” Vlieghe said.

 

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