You are here: Home - Investing -

Sterling climbs as MPC members back Carney’s forward guidance

Written by:
Sterling rose against other major currencies this morning after it was revealed that most members of the Monetary Policy Committee backed Mark Carney's guidance on interest rate policy.
Sterling climbs as MPC members back Carney’s forward guidance

The pound was up 0.4% against the dollar and 0.3% against the euro shortly after the announcement, while the yield on 10-year gilts rose 3.2 basis points to 2.63%.

The currency strengthened after it emerged eight out of the nine MPC members voted in favour of the policy shake-up, which last week saw the Governor indicate to the market how long he intends to hold the base rate at a record low.

Carney announced rates will not rise until the unemployment rate falls back below the 7% mark. It is currently near 8%.

The minutes of the meeting held on 31 July and 1 August also show the committee voted unanimously to leave the Bank’s quantitative easing programme unchanged at £375bn.

However, the MPC said it “stands ready to undertake further asset purchases while the LFS unemployment rate remains above 7% if it judges additional monetary stimulus is warranted.”

The minutes said most members wanted to first gauge the impact of the guidance on asset prices before considering the case for another round of stimulus.

The dissenter on forward guidance was Martin Weale, who voted for a time horizon for the first inflation ‘knockout’ that was shorter than proposed.

Forward guidance is subject to caveats, including two related to price stability. One of those is a ‘knockout’ if inflation is seen more than half a percentage point above the Bank’s 2% target over the next 18-24 months. Weale said he wanted to see a shorter time horizon, but did not disagree with the principle of Carney’s policy.

With the unemployment rate now a major factor for the MPC to consider, all eyes were on the latest update from the Office for National Statistics (ONS) which was also released today.

The unemployment rate in the second quarter of the year was unchanged at 7.8%, holding at the same level as Q1, although it has fallen 0.2 percentage points from a year earlier.

The total number of unemployed people in Q2 was 2.51 million, down 4,000 from January to March and down 49,000 from a year earlier.

The employment rate for those aged between 16 and 64 was 71.5%, up 0.1 percentage points from January to March.

Related Posts

Tag Box

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Everything you wanted to know about ISAs…but were afraid to ask

The new tax year is less than a fortnight away and for ISA savers or investors, it’s hugely important. If yo...

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week