The pound fell sharply yesterday, after Bank of England Governor Mark Carney doused speculation that he might soon back higher interest rates.
The Bank of England chief told bankers on Tuesday that he first wanted to see how the economy coped with Brexit talks in coming months.
Sterling slid by more than half a cent after Carney distanced himself from three other BoE rate-setters who said last week that rates should start to rise for the first time in a decade.
"Now is not yet the time to begin that adjustment," he said in an annual speech at London's Mansion House.
The BoE has found itself in an awkward position. Inflation is rising quickly after falls in the value of sterling since last summer's Brexit vote, while signs of weakness in the economy are increasing, including a slowing of pay growth.
The British economy has also been hurt by uncertainty about the Brexit negotiations, which started on Monday, and a murky political outlook further clouded by elections on June 8 in which UK Prime Minister Theresa May lost her parliamentary majority.
Chancellor of the Exchequer Philip Hammond, who has sought to soften May's at times confrontational tone towards the bloc, told the same Mansion House audience that Britain faced a challenge to secure appropriate transitional trade arrangements with the EU before it left the bloc in 2019.
Carney sounded a similar note of caution, saying that if there was insufficient progress on creating a Brexit transition period, businesses might start to activate their own contingency plans.
It was in any case too soon for the BoE to start raising borrowing costs "given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth," he said.
Sterling's post-referendum fall of more than 10pc is pushing up UK inflation, which has hit its highest in nearly four years and squeezing consumer spending. (Reuters)