- Pound Drops as BOE’s Carney Says Not Yet Time to Raise Rates
The pound fell to a one-week low after Bank of England Governor Mark Carney said he is still worried about the impact Brexit will have on the U.K. economy and signaled he wasn’t in a hurry to raise interest rates any time soon.
Sterling weakened against all of its Group-of-10 peers, and gilt yields declined as Carney said that domestic inflation pressures remain subdued. Speaking at London’s Mansion House on Tuesday, he also highlighted the weakness in the economy and the increased uncertainty as the nation formally starts talks to exit the European Union.
Carney’s comments were seen as pushing back against a hawkish shift at last week’s Monetary Policy Committee meeting, where three members unexpectedly voted to raise the benchmark rate from a record-low 0.25 percent. That split in the MPC is exacerbating the uncertainty faced by pound traders as the U.K. begins its Brexit negotiations in the wake of inconclusive elections earlier this month.
“Carney pushed the pound lower” on comments that now wasn’t the time to hike rates, said Neil Jones, head of hedge fund sales at Mizuho Bank. “Market sentiment toward sterling had shifted toward a possible rate hike following a shock shift to 5-3 last week from the MPC. The balance is being addressed somewhat at Mansion House.”