The Great Britain pound erased its earlier losses today after Bank of England Governor Mervyn King signaled that the central bank may refrain from lowering interest rates even as outlook for the UK economy remains gloom.
King said today:
Many of the conditions necessary for a recovery are in place, and the Monetary Policy Committee will continue to do all it can to bring about that recovery. As I have said many times, the recovery and rebalancing of our economy will be a long, slow process
He also noted that a decrease of interest rate may be “counter-productive” and there are other methods to meet the inflation target.
The Governor was speaking after the Inflation Report that left little place for optimism. Inflation is expected to fall below 2 percent, while the outlook for economic growth was revised down to 2 percent from May’s 2.5 percent.
The speech of King was far less dovish than one might expect, nevertheless, and that helped the sterling.
GBP/USD was up from 1.5621 to 1.5655 as of 22:26 GMT today, following the drop to 1.5571. GBP/JPY traded near its opening level of 122.77 after it fell to the low of 121.87 earlier. EUR/GBP was down from 0.7935 to 0.7896.
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