GBP rose on Carney's comments
FXBAZOOKA.com - GBP/USD rose towards 1.5350 after the Bank of England released its quarterly Inflation report.
The report itself said that there are downside and upside risks to the inflation in the UK and these risks are balanced. Inflation forecast for 2015 was revised down from 1.4% to 0.5%. Inflation could fall below 0% in the coming months. Falling oil prices are the main cause of low inflation. Still, inflation will be at 2% in 2 years. The Bank of England’s forecasts are based on market view for first rate hike in Q3 2016.
Despite the downgrade in inflation, Bank of England’s Governor Mark Carney gave some more hawkish comments saying that the next change in the interest rates will be to the upside. As a result, some fears that the Bank of England will follow other central bank in cutting rates have dissolved. According to Carney, the central bank can do little about the negative effects of the falling oil prices and these effects are likely to dissipate in a year.
Carney pointed out that the Bank of England’s forecasts may change either way: if upside risks increase, the rate hike may come earlier, but if downside risks increase, the Bank of England may cut rates.