Pound Posts Best Week Since June on View Recovery Is on TrackBy
Policy maker Kristin Forbes sees scope to raise rates sooner
Sterling strengthens versus most major peers this week
The pound posted its biggest weekly gain versus the dollar since June as an inflation survey supported Bank of England officials’ contention that U.K. economic growth is on track.
Sterling advanced versus most of its 16 major peers this week as BOE policy maker Kristin Forbes said there was scope to start raising U.K. interest rates sooner. The pound dropped versus the single currency on Friday as a report showed construction unexpectedly contracted in July. Mortgage lender Halifax said on Thursday that house prices surged 2.7 percent in August, the most since May 2014.
“Sterling’s recent appreciation could create less drag on import prices and inflation than we might have expected if the levels of pass-through seen after the crisis persisted,” Forbes said in a speech in Cardiff on Friday. “If this plays out, monetary policy would need to be tightened sooner than based on the older models.”
The pound fell 0.1 percent to $1.5427 as of 4:52 p.m. London time. The U.K. currency climbed 1.7 percent versus the dollar this week, the biggest gain since June 19. Sterling depreciated 0.6 percent to 73.48 pence per euro, leaving it little changed since Sept. 4.
The BOE’s Inflation Attitudes Survey, based on a GfK poll of 2,051 people Aug. 6-11, showed that respondents expected inflation to reach 2 percent in 12 months’ time. While that’s lower than the 2.2 percent recorded in May, it compares with an actual rate of 0.1 percent in July. The central bank’s target for the inflation rate is 2 percent.
Construction output dropped 1 percent in July, after climbing 0.9 percent a month earlier, the Office for National Statistics said on Friday. The median prediction in a Bloomberg survey of economists was for a 0.5 percent increase.
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