The pound advanced on Wednesday after BoE’s chief economist Andy Haldane said he would likely vote for a rate hike later this year.
The pound was up 0.55 percent against the dollar to $1.2698, after hitting a low of $1.2589 earlier in the day.
Reasons for raising interest rates
According to Mr. Haldane, there are six reasons for tightening monetary policy – reduced risk of deflation, global growth, diminishing risk of populist and protectionist politics, signs that business investment may increase, a faster than expected rise in inflation and the fact that a tightening would be modest.
“Provided the data are still on track, I do think that beginning the process of withdrawing some of the incremental stimulus provided last August would be prudent moving into the second half of the year,” said Andy Haldane in Wednesday’s speech.
He also unveiled that he did not vote to increase rates at the June meeting. The comments unveiled a developing split at the central bank, as three out of eight BoE policymakers voted for a rate hike last week.
The pound recovered from previous losses following the Queen’s Speech, which covered a two-year period and largely focused on Brexit.
“Forget the Queen’s speech, it was all about Andy Haldane this morning. The pound jumped and the FTSE dropped after the Bank of England’s chief economist and Monetary Policy Committee member said he’s ready to vote for an increase in interest rates “relatively soon”. This came as a major surprise because Mr Haldane has long been a known dove. He is going head-to-head against the Governor Mark Carney, who is fast losing support on his dovish stance,” said Fawad Razaqzada, market analyst at Forex.com.
Governor Mark Carney sent the pound lower on Tuesday after he said it was not the right moment to raise interest rates.