Bank of England Governor Mark Carney struck a more dovish tone on Tuesday when he was quizzed by lawmakers, remaining balanced on the issue of a sooner-than-expected rate rise.
Speaking in front of the Treasury Select Committee, Carney said there was more slack in Britain’s labor market than expected, and this needed to be absorbed before interest rates started to rise.
It marked a change in tone from comments made earlier this month, when Carney said interest rates could rise sooner than expected. Government bond yields shot up and sterling rose to a near five-year high against the dollar as a result. Prior to this, most investors were not expecting a rate hike until 2015.
But on Tuesday, Carney stressed: “Taken in isolation the continuation of development on the wage front suggest to me … that there has been more spare capacity in the labor market than we previously had thought.”
Sterling fell to $1.6974 following the comments, before recovering slightly to trade 0.16 percent lower.
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