Sterling lifts as Carney says BoE not indifferent to its plight
The Bank of England is not indifferent to the level of sterling, its governor said yesterday, giving a boost to the battered pound which has slumped in value since British voters decided to leave the European Union.
He also said the bank would tolerate slightly higher inflation than its formal target if necessary. "Our job is not to target the exchange rate, our job is to target inflation," Mark Carney said during a public meeting in Nottingham.
"But that doesn't mean we're indifferent to the level of sterling. It does matter, ultimately, (for) inflation and over the course of two to three years out, so it matters to the conduct of monetary policy."
Sterling rose on Carney's comments, giving it a little relief after falling nearly 20pc against the US dollar since the referendum because of concerns among investors that Britain's economy will suffer from Brexit.
The pound briefly recovered all of the day's losses against the dollar, gaining half a cent to stand at $1.2252 immediately after the remarks. It also rose against the euro.
The BoE has previously signalled it is likely to cut interest rates below their already historic low of 0.25pc in order to help the economy cope with the shock of the Brexit vote. But since those signals from the bank, the pound has extended its slump which is likely to further push up the price of imports and Britain's inflation rate.
The BoE's next announcement on rates is due on November 3. Deputy governor Ben Broadbent, speaking at a separate public meeting in Derby, said the fall in the value of the pound was important for inflation, but the BoE had to look at many factors.
Mark Carney said he was willing to allow inflation to run "a bit" higher than the central bank's 2pc target in order to help employment and allow Britain's economy to grow.
British inflation is expected to rise above 2pc in 2017 because of the sharp fall in the value of the pound. At the same time, the economy is expected to slow.