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Pound jumps on Haldane's support for 2017 rate rise

Bank of England economist makes significant intervention in debate over interest rates, sending pound climbing.

Pound jumps on Haldane's support for 2017 rate rise

The pound has risen sharply after Bank of England economist Andy Haldane signalled his support for an interest rate rise this year, arguing leaving it too late could risk much steeper rises later on.

Sterling swung into gains, up 0.4% against the dollar at $1.268, having fallen below the $1.26 mark earlier in the session. But Haldane's intervention wasn't enough to help the pound recover its losses since Bank of England governor Mark Carney's Mansion House speech yesterday, in which he argued 'now is not yet the time' to raise interest rates.

Haldane's comments contrasted markedly with Carney's and mark an important intervention, given the economist was previously perceived as among the 'doves' on the monetary policy committee (MPC), and was not one of the three to vote for a rate rise at the June meeting.

'I think that the balance of risks associated with tightening "too early" on the one hand, and "too late", on the other, has swung materially towards the latter in the past six to nine months,' he said.

'The risks of tightening "too early" have shrunk as growth and, to a lesser extent, inflation have shown greater resilience than expected. And if policy tightened "too late", this could result in a much steeper path of rate rises later on.'

The pound's rise weighed on the FTSE 100, which fell 49 points, or 0.7%, to 7,424. A stronger pound tends to hamper the index, whose members rely on overseas markets for around three-quarters of their revenues.

Provident Financial (PFG) was the biggest faller, down 17.4% at £23.67 after a profit warning. But Whitbread (WTB) bucked the falls, up 3.5% at £39.88 after reporting a 7.6% rise in first quarter sales across its Premier Inn hotels and Costa Coffee chain.

3 comments so far. Why not have your say?

Godfrey Billy

Jun 21, 2017 at 18:09

It appears Andy Haldane has not received Mark Carneys MEMO about his speech. Eagerly awaiting next meeting!

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Andrew Stevenson

Jun 21, 2017 at 20:14

Not one single member of the MPC section within the BOE has had the guts to stand up to Carney (presumably all terrified for their futures). I really can't see Haldane lasting very long if he doesn't get back into line.

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Alan Tonks

Jun 21, 2017 at 21:31

I didn't know they had any economists at the Bank of Carney!!

They are only manipulators pure and simple!!

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