Sterling hits one-month high as BoE rate hike bets brought forward

Lydia Fleming
June 30, 2017

GBP/USD gained upside momentum in the North American session following comments from Bank of England Governor Mark Carney that a removal of stimulus could become necessary.

The exchange rate shot up to €1.13878 to the pound following the announcement.

Carney said the boom in vehicle loans is a major factor behind the pick-up in consumer debt, but that he remained "sanguine" about the banking sector's overall exposure to it. "Whether through an increase in long-term interest rates, adjustments to growth expectations or both", Carney says. He did not repeat that phrase on Wednesday, and markets immediately priced in a greater chance of an earlier-than-expected rise. It does this primarily by identifying, monitoring and taking action to remove or reduce systemic risks, with a view to protecting and enhancing the resilience of the United Kingdom financial system.

Jones suggested three guiding principles for the market, covering lending responsibly and safely, focusing on the customer, with transparent outcomes and providing high levels of support to dealers and customers, with a particular focus on education.

The pound jumped by well over a cent after Carney's comments to hit $1.2971, its strongest since June 9, the day of the results of Britain's parliamentary election.

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"Consumer credit has increased rapidly", the report said.

Speaking to hundreds of auto finance industry leaders at the event in London, he said: "We are a systemically important market to the United Kingdom consumer and we are fast becoming the biggest source of non-mortgage borrowing in the UK".

Mark Carney said rates could go up if wages increase and businesses starts investing more.

Inflation is above the BoE's target at 2.9 percent and is set to rise higher as the pounds fall since last year's Brexit vote feeds through into prices.

The order comes amid concerns over riskier lending as banks become more complacent due to the decline in default rates and benign economic environment.

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The MPC voted 5-3 in favour of leaving rates on hold at 0.25% at its most recent meeting, but the City was taken aback when the Bank's chief economist, Andy Haldane, said he had been close to abandoning his no-change stance.

Carney said the FPC's action did not in itself imply that monetary policy was also about to tighten.

Since 2011, the BOE's monetary policy committee is most divided at its interest rates and the most dovish member is Haldane.

Total consumer loans outstanding now add up to just short of £200bn, with another £1.7bn added in the month of May alone, the Bank of England reports.

The IMF noted that US President Donald Trump's economic policy proposals were no longer seen as likely to succeed.

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Other reports by Info About Network

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