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Sterling accelerates gains after BoE’s Haldane turns hawkish

The pound has accelerated its gains, rising off its lowest level in two months after Andy Haldane became the latest member of the Bank of England’s rate-setting committee to come out in favour of tighter monetary policy.

Despite not voting for a hike at last week’s June meeting, Mr Haldane – considered one of the most dovish members of the MPC until now – said a move to “partially” withdraw some of the BoE’s stimulus measures would be “prudent relatively soon”.

Sterling rose 0.4 per cent against the dollar having been 0.1 per cent stronger before the speech, while 10-year gilt yields gain 2 basis points to 1.02 per cent.

In a speech in Yorkshire today, Mr Haldane said:

Having weighed the evidence, I think that the balance of risks associated with tightening “too early”, on the one hand, and “too late”, on the other, has swung materially towards the latter in the past six to nine months.

The risks of tightening “too early” have shrunk as growth and, to lesser extent, inflation have shown greater resilience than expected. And if policy tightened “too late”, this could result in a much steeper path of rate rises later on.

The BoE launched a three-pronged stimulus package after the UK’s Brexit vote, cutting rates to record lows, re-starting QE and launching a cheap funding scheme for retail banks in August.

Chart: Bloomberg