The pound dives after Carney pours water on the prospect of a rate hike

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June 20, 2017 12:27 PM

Bank of England governor Mark Carney spoke at Mansion House with the Chancellor this morning, prompting drop in pound.

Sterling dropped to its lowest point since April on Tuesday after Governor of the Bank of England Mark Carney said that

Carney said borrowing costs should not go up before there is a clear picture of how the Brexit talks will play out during a speech made at London's Mansion House.

Although sterling fell this morning after the speech, it fell even further on Tuesday afternoon after the DUP reported that talks with Prime Minister Theresa May had not gone as they had expected.

"Given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment," said Carney.

"In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations," he said.

Carney's comments come after three members of the Bank's Monetary Policy Committee last week voted to increase rates, shocking investors who had expected just one member, the outgoing Kristin Forbes, to back tightening policy.

The speeches weree originally scheduled for last Thursday, but the City of London corporation cancelled the event following the Grenfell Tower disaster.

"Investors today will focus on what BoE’s Mark Carney has to say after three MPC policymakers voted to raise interest rates last week, " Rising prices and falling wages is one of the biggest challenges a central bank can face, and investors need more clarity on what tools are available to tackle these problems," he said.

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