Britain's pound fell over half a percent on Monday after the Bank of England's governor Mark Carney said that any rise in United Kingdom interest rates in the coming months would be limited and gradual. Interest rates are likely to be higher as a result, he said.
All of those have implications for the economy and monetary policy.
The Governor said Brexit was likely to push up inflation in the short term as fewer workers from overseas came to the United Kingdom, making it more hard for employers to recruit and so pushing up wages.
BoE MPC last week gave a strong hint that the UK's first rate rise in a decade was nearing, despite the uncertainty surrounding Brexit.
The current pound to euro exchange rate is €1.12693 (at the time of writing).
Economists at HSBC released a note on 18 September saying they expect two interest rate rises by March 2018.
Given the UK's rising inflationary pressure and the continued erosion of slack in the economy, BOE is likely to withdraw monetary stimulus over the coming months in order to return inflation sustainably to target, said Carney. The pound has risen to $1.35, which is very close to its pre=Brexit vote gauge of $1.41-1.60, compared to the slump down to as low as $1.16 last summer.
Pakistan opens fire on 8 Indian posts in Jammu's Arnia sub
A BSF trooper had also lost life in Pakistani shelling two days back and there is no let up in cross border shelling. Despite a ceasefire agreement that was reached in November 2003, sporadic skirmishes continue in Kashmir.
Carney also warned of the downside short-term effects of Brexit on the UK's foreign trade, reiterating that establishing new trade ties or reviving connections with the former British Empire nations will take time.
BoE Carney Reigns in Rate Hike Excitement for GBPBoE Carney recently took to the stage in Washington DC to assert that all changes to interest rates will be "limited" and "gradual" - a statement that curbed some of the recent enthusiasm from last week's set of hawkish statements from the BoE.
However, markets have cooled on the Pound since yesterday, after BoE Governor Mark Carney held another, slightly more cautious speech.
Britain's inflation rate has accelerated this year, due in large part to the fall in the value of the pound since the referendum decision in June 2016 to leave the EU.
He said there remains "considerable risks to the United Kingdom outlook", noting how consumers, companies and markets respond to the Brexit process. This is because trade ties with the European Union may be impacted and it will take time to build new ones with other countries.
It had been pressured earlier as traders digested comments made on Monday by Bank of England Governor Mark Carney.
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