- Minouche Shafik, BoE Deputy Governor for Banking and Markets
Minouche Shafik, Bank of England Deputy Governor, said she would not vote for an interest rate hike if there is no evidence of sustained growth in wages. After Shafik said she would "proceed with caution" when considering to wean the British economy off the crisis-era level of interest rates, the Pound dropped versus all of its 16 major counterparts, halting its two weeks of rally against the US Dollar. The UK currency also came under pressure as crude oil in New York fell below $35 per barrel for the first time since 2009. The Monetary Policy Committee said last week that low oil prices and sluggish wage gains are raising risk that price growth will take longer to pick up than they currently estimate. A report later in the day is expected to show the UK inflation was just 0.1% in November, far below the central bank's 2%. Shafik said that she expected the recent strength of Sterling to act as a drag on inflation for some time to come.
The BoE's nine-member MPC voted 8-1 to maintain borrowing costs at record low of 0.5% last week. Investors believe the central bank would refrain from hiking interest rates until late 2016 or early 2017 and will have raised it to only 1% in around two-year time. BoE officials led by Governor Mark Carney signalled that an interest-rate increase is likely to be their next move after maintaining ultra-low borrowing costs for almost a decade.
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