The Bank of England could keep interest rates lower for longer if sterling strengthens much more, Bank of England deputy governor Charlie Bean said on Monday, in a rare comment by the central bank on the level of the pound.
Bean said that sterling’s current level was “fine”, but that Britain would find it harder to enjoy a solid export-based recovery if the currency strengthened any more.
He also cautioned against getting “too hung up” about exactly when the central bank will raise interest rates from their record low 0.5 percent, after financial markets and other policymakers pointed to spring 2015 as a possibility.
In a speech to local businesses in Darlington, northeast England, Bean said there were clear signs Britain’s economy was on the mend, but that it was “early days” and the trade deficit needed to narrow to put growth on a more solid footing.
“Any further appreciation of sterling, which has risen almost 10 percent in trade-weighted terms since March, would not be particularly helpful in terms of facilitating a rebalancing towards net exports,” Bean said.
In a question and answer session after his speech, he said a stronger sterling would could reduce inflation because of weaker import prices.
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