CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.1% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Pound buoyed by BoE governor’s inflation remarks

By Neil Dennis

07:32, 28 September 2021

Andrew Bailey, Bank of England governor
Andrew Bailey still sees inflationary pressure as transient – Photo: Bank of England

The pound gained further support on Tuesday after Andrew Bailey, Bank of England governor, confirmed any likely policy response to rising inflation would involve a rate hike.

While sterling was fractionally weaker against the resurgent dollar at $1.3688, it was up 0.1% at £0.8528 versus the euro and 0.3% higher at JPY152.37 against the yen.

In his speech on Monday night to the Society of Professional Economists, Bailey reiterated the Bank’s central view that price pressures were transient – saying that demand would shift back from goods to services and that global supply chains would likely repair themselves.

Modest tightening

However, turning to this month’s Monetary Policy Committee (MPC) meeting, he said all nine members believed that there would need to be some modest tightening to be consistent with meeting the Bank’s 2% inflation target rate over the medium term.

And while the £895bn ($1.2bn) asset purchase scheme had been successful in keeping borrowing costs down and providing insurance against market volatility and dysfunction, the best response in tackling any persistent price pressure would be a hike in interest rates.

“It follows that the monetary policy response, if we need to make one, to the inflation pressure should involve the Bank Rate not QE. There is no reason to beat about the bush on this point,” Bailey said.


0.65 Price
+0.160% 1D Chg, %
Long position overnight fee -0.0072%
Short position overnight fee -0.0011%
Overnight fee time 22:00 (UTC)
Spread 0.00006


1.08 Price
+0.310% 1D Chg, %
Long position overnight fee -0.0080%
Short position overnight fee -0.0002%
Overnight fee time 22:00 (UTC)
Spread 0.00006


149.95 Price
-0.100% 1D Chg, %
Long position overnight fee 0.0114%
Short position overnight fee -0.0196%
Overnight fee time 22:00 (UTC)
Spread 0.010


0.65 Price
+0.140% 1D Chg, %
Long position overnight fee -0.0072%
Short position overnight fee -0.0011%
Overnight fee time 22:00 (UTC)
Spread 0.00006

Managing expectations

He added that it would be crucial to manage inflation expectations so that price pressures don’t become embedded – pushing retailers to make further price rises and encouraging employees to demand higher wages.

“In this way, what start out as relative changes in price levels for some goods and services can become generalised and turn into persistent inflation. I take this risk very seriously,” he said.

While analysts felt that much of governor Bailey’s speech was re-treading ground covered in the statement from the MPC meeting earlier this month, sterling interest rate markets were pushed higher by the remarks.

Chris Turner, global head of markets at ING, said: “We do not expect the BoE to deliver on the hawkish expectations priced by the market, but for the time being this theme may well pressure EUR/GBP back to the £0.8500 lows.”

Read more: Pound boost on rate-hike forecasts likely too optimistic

Related topics

Rate this article

Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 580.000+ traders worldwide that chose to trade with

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading