Trio of BoE rate-setters dampen talk of interest rate hikes

A trio of Bank of England rate-setters has said it is still too early to lift interest rates even though prices are still rising faster than forecast.

The comments have helped to drag the pound off recent highs.

Today, the pound is one cent lower against the euro at €1.2137 and 0.11% lower against the dollar at $1.4932 - having bounced to $1.509 on Monday.

Sterling has been climbing steadily since the middle of May and got a boost after MPC member Andrew Sentance wrote in the Telegraph that rate increases are increasingly likely.

News he had actually voted for an increase in the June meeting added to hopes a rate rise is imminent.

A rate increase would make the pound relatively more attractive and draw in currency investors but the Bank of England believes a weak sterling will help boost demand for UK goods overseas. 

And MPC member David Miles told the Daily Mail that while inflation is 'uncomfortably' it is still too early to lift rates.

'My own judgment is that we haven't yet got to the point at which a tightening in monetary policy is the right thing to do,' he told the newspaper.

That echoed similar comments from fellow committee members Adam Posen and Paul Fisher yesterday.

Posen said the recovery is still not guaranteed and rate hikes would not be appropriate.

'If we are fortunate, our present monetary policy stance combined with the UK economy’s natural tendency to recover and with sustained global growth outside of Europe will be sufficient to get the UK to the good outcome,' he said. But he warned much depends on the fate of other economies.

Posen said he would happily vote for an interest rate increase if the positive outcome materialised, but said he is not confident that will be the case.