BoE's Carney dampens expectations for May rate hike, sees 'mixed' data

Darnell Taylor
April 20, 2018

Bank of England governor Mark Carney spoke last night and suggested that although interest rates will be going up the pace may not be as quick as some may expect and this caused the Pound to fall vs the single currency in early morning trading.

"The biggest set of economic decisions over the course of the next few years are going to be taken in the Brexit negotiations and whatever deal we end up with", he added.

But he said it was important to look through short term volatility and consider the overall momentum of the economy.

Investors had already started to doubt the Bank would attempt a second interest rate rise this year in November, but until yesterday a first, in May, had been heavily priced in.

He said: "I don't want to get too focused on the precise timing, it is more about the general path".

10 year government yields rose above 2.9% after more talk of denuclearisation in North Korea and encouraging USA data.

Pound to Euro reaction to Carney
BoE's Carney dampens expectations for May rate hike, sees 'mixed' data

But, should Saunders hint that an interest rate rise will have to wait, the Pound could come under notable pressure as without a key hawk on board a May rate rise is all but dead.

"On the softer side some of the business surveys have come off", he said. Clearly Carney's tone was a little negative but overall the United Kingdom economy has been showing positive signs recently and one of the sticking points continues to be the uncertainty caused by Brexit and this will take a long time before we get anywhere near any kind of resolution.

The Governor tried to reduce expectations for a hike at the May meeting, noting that there were other meetings throughout the course of the year.

In an opposite situation to the United Kingdom, the U.S. dollar has appreciated thanks to signs that there could be a sustained series of Federal Reserve interest rate hikes.

Lowcock said: "Brexit continues to weigh on the country and its stock market, but the global economy is in good health which provides support to the UK's economy as well. Productivity is not increasing, which will limit the rate at which people's wages can pick up".

Speaking in Pittsburgh, Ms Mester said: "A gradual upward path of interest rates will help sustain the expansion and balance the risks so that our monetary policy goals are met and maintained".

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