The pound has dropped back to a low last seen in 2009 versus the dollar and a year low against the euro after Bank of England governor Mark Carney ruled out any imminent increase in interest rates. Having traded at $1.70 as recently as 2014, sterling dropped to $1.414, its lowest since early 2009, following Carney’s warning that he did not have a ‘set timetable’ to raise interest rates. Despite the US Federal Reserve in December finally breaking its near-decade run of borrowing costs effectively at zero, he added that slowing global growth and political uncertainty would delay a Bank of England hike.
The timetable for a planned referendum on the UK’s continued membership of the European Union has been rapidly bought forward to a likely date in the autumn of this year, overshadowing monetary policy.
Delivering the annual Peston Lecture at Queen Mary University, Carney said: ‘Private and public balance sheets remain stretched. The global environment is unforgiving. And the supply side of our economy is still healing.
‘Last summer I said that the decision as to when to start raising the bank rate would likely come into sharper relief around the turn of this year.
‘Well the year has turned, and, in my view, the decision proved straightforward: now is not yet the time to raise interest rates. This wasn’t a surprise to market participants or the wider public….
[Source: CityWire - David Campbell - January 19, 2016]