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Further hints of rate rise improve pound

18 Aug 2014

Mark Carney, Governor of the Bank of England (BoE) has hinted that interest rates could rise soon even if average UK wages do not.

Speaking to The Sunday Times, Mr Carney said: ‘We have to have the confidence that real wages are going to be growing sustainably before rates go up. We don’t have to wait for the fact of that turn to do so’.

As a result of these comments, the pound gained 0.2% against the US dollar, to $1.6723.

He added: ‘Wherever the finish line was in the depths of the crisis, we are much more than halfway towards the finish line now.

‘The expansion is proceeding, momentum is more assured; the very fact we have had consistent quarters of growth in line with, or slightly better than, our forecasts show that’.

Recent figures indicate that average pay rose by 0.6% year-on-year in the three months to June, which is still below interest rates. The forward guidance policy released by the BoE has now been referred to by Mr Carney as ‘an expectation not a promise’.