Speech highlights from Bank of England Governor Carney:

  • Expects BOE to raise rates over next 3 years
  • Need for rate hike reflects the momentum in the economy and a gradual firming of the underlying inflation pressures
  • Firming of inflation pressures will become more apparent as the effects of past commodity price falls drop out of the annual inflation rate around the end of the year
  • Wide range of possible outcomes in bank rate path
  • Economic shocks could affect rate rise timing
  • Right policy mix leans to looser monetary policy
  • Household debt could impact the path of policy
  • Large current account deficit means right policy mix leans to tighter fiscal, more accommodative monetary and tighter macroprudential policies
  • In the current circumstances there is no need to wait to raise rates because of a risk management approach and run the risk of inflation overshooting the target
  • Decision about when to start interest rate adjustment will come into sharper relief around the turn of the year
  • Full speech (pdf)

Hawkish comments from Carney on Tuesday sent cable up about 200 pips on Tuesday. The speech was part of the Margna Carta Lecture Series and took place in Lincoln, UK.

Cable rose about 15 pips as the headlines hit, touching a US high of 1.5630. The high in Asia was 1.5650.

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