Forbes says interest rates need to be raised "well before" 2% target

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Sunday, Aug 16 2015

There are no major data releases from the UK today. Over the weekend Bank of England's Kristen Forbes said interest rates will need to be raised "well before" inflation hits 2% target. "Maintaining interest rates at the current low levels during an expansion risks creating distortions. Therefore, interest rates will need to be increased well before inflation hits our 2% target. Waiting too long would risk undermining the recovery-especially if interest rates then need to be increased faster than the gradual path which we expect."

She also added that China yuan devaluation means "bit more time before inflationary pressures build in the UK". Right time to raise rates depends on more evidence of inflation heading towards target, according to Forbes. Increasing interest rates prematurely could moderate companies' willingness to invest and consumers' willingness to spend.

Sterling is currently being traded around 1.5650 level. Pair is likely to find support around 1.56 handle and resistance above 1.57 area. Later today, in the US session, Empire State Manufacturing Index figures are scheduled for a release.

More in this category: « Yuan will move in both directions Empire State Manufacturing Index at lowest level since 2009 »

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