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BoE's Carney dials back on rate hike expectations, pound drops
(WebFG News) - An interest rate rise is "likely" in 2018 but any tightening will be gradual, Bank of England Governor Mark Carney told the BBC, highlighting the shortfall seen in investment versus what might have been expected were it not for Brexit.
His remarks weighed on Sterling.
As of 1928 BST the pound was at 1.40927 against the US dollar, trading down by 0.78%, and by 0.55% versus the single currency, to 1.1413.
In an interview with the broadcaster, the head of the UK's central bank said people "should prepare for a few interest rate rises over the next few years", adding that the biggest set of economic decisions that would be taken over the next few years would be taken in the Brexit negotiations, with the Monetary Policy Committee adjusting its stance in response.
"I don't want to get too focused on the precise timing, it is more about the general path," he reportedly told the BBC's Kamal Ahmed.
The Monetary Policy Committee was next set to meet on 10 May and until Thursday many had expected the Old Lady on Threadneedle Street to go ahead with another rate rise, despite recent softer readings on activity.
On the recent run of economic data, some of which had been "softer" (such as the retail sales report released earlier on Thursday), Carney said: "[...] we are all aware of the squeeze that is going on in the high street.
"We'll sit down calmly and look at it all in the round."
The BoE chief also indicated he expected there would be "some differences of views" when the MPC next met on 10 May.
By implication, any hike in Bank Rate would then not be "unanimous", a possibility that some in markets may have caught upon.
He also indicated there would be other meetings over the course of 2018, which perhaps left his remarks somewhat open to the interpretation that a hike could be postponed.
"I am sure there will be some differences of view but it is a view we will take in early May [at the next meeting of the Bank's Monetary Policy Committee], conscious that there are other meetings over the course of this year," he said.
Indeed, Ahmed himself went on to indicate that "Listening to the Governor, I sensed that he was a little more dovish on the possibility of an interest rate rise next month than he had been previously."
Regarding low levels of investment relative to other countries since 2016, Carney said: "Most recently it has been the uncertainty around Brexit that has prevented what would otherwise have been a surge in investment in this economy akin to the big pick ups in business investment we have seen in other economies."