- Kristin Forbes, member of BoE's Monetary Policy Committee
Kristin Forbes, the Bank of England's Monetary Policy Committee, hinted that interest rates in the UK may start rising sooner than expected amid improving global economy. As a result, the British Pound strengthened for the first time versus the US Dollar, gaining 0.2% to $1.5013. Forbes is optimistic about the world's economic prospects given strong growth in the US, as well as potential for falling oil prices to spur consumption and investment in the UK, "as decline in oil prices will lead to a redistribution of income and demand away from net oil exporters toward net oil importers." Plunging oil prices in the UK have brought the inflation rate to the lowest level in more than a decade, which would further bring down consumer prices in the near term. However, rates would eventually rebound, potentially breaking above the 2% inflation target, Forbes said. The UK economy will keep momentum throughout this year, as low inflation should spur spending and investment, resulting in a stronger argument for an earlier rate lift than market participants expect at the moment to halt inflation from overshooting the BoE's 2% inflation goal.
The BoE has held interest rates at a record low 0.5% since early 2009. The central bank plans to normalize the monetary policy by a low and incremental increase of interest rates. Investors expect the rates to start rising in the mid-2016.
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