Pound Hits Post-Brexit Vote High as BoE Rate Setter Adds to Hawkish Message
The U.K. pound extended gains in early Friday trading to reach its highest level against the U.S. dollar since the country voted to leave the European Union in June of last year.
The pound was marked 1.35% higher against the greenback at 1.3577 by 11:00 London time following comments from Bank of England rate-setter doubled-down on the hawkish message delivered at the Bank's policy meeting on Thursday by saying that "the moment when the Bank rate may need to rise" is approaching.
"Until recently, I thought the appropriate response of monetary policy was to be patient, given modest growth and subdued underlying inflationary pressure," said BoE board member Gertjan Vlieghe. "But the evolution of the data is increasingly suggesting that we are approaching the moment when Bank Rate may need to rise."
Friday's moves extend the pound's biggest rally since 2016 amid warnings from the BoE that business and investors are too complacent about low interest rates, which currently sit at 0.25%, the lowest in the Bank's near 300-year history, given the rapid increase in U.K. inflation.
U.K. inflation rose more than forecast last month, the country's statistics office said Tuesday, with consumer prices accelerating at a 2.9% clip, topping the 2.8% consensus forecast and matching May's four-year high. So-called core inflation, which strips out volatile prices for food and energy, rose to 2.7%, the ONS said, the highest since 2011.
"A majority of (Monetary Policy Committee) members judge that, if the economy continues to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflationary pressure ... some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target," the BoE said in public minutes of its Thursday meeting in London.
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