- Alvin Tan, currency strategist at Societe Generale
Britain's economic recovery might be jeopardized by a premature decision to raise interest rates, Andrew Haldane, the Bank of England's chief economist said, providing the strongest signal yet that the central bank is ready to delay increases in borrowing costs. Haldane appeared to be pessimistic about the British economy due to weaker global economy, low wage growth as well as financial and political risks. The prospect that interest rates will remain lower for longer period of time pushed the Sterling lower on the foreign exchanges, with the Pound weakening half a cent versus the US Dollar. Haldane's dovish comments follows hawkish view presented by the Monetary Policy Committee member Martin Weale, who said that despite the current rate of inflation below target, there are risks it could accelerate above the goal in the medium-term if the BoE keeps delaying interest rate lifts. The current rate of consumer inflation declined to 1.2% largely due to early this year's advance of the local currency imports and lower energy costs.
The UK interest rates have stood at a record low of 0.5% since the peak of the financial crisis more than five-and-a-half years ago. Market predictions of when they will finally rise have changed sharply in the past few days following the biggest global sell-off of shares in two years due to concerns of slower growth and intensifying political risk.
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