2018.05.2222:26:00UTC+00BoE’s Carney Expects Economic Rebound, ‘Gentle’ Rate Hikes

The British economy is likely to be on the rebound in the present quarter following three months of near stagnation to the beginning of the year, Bank of England Governor Mark Carney told the parliament on Tuesday, indicating that they are still planning on lifting interest rates at a gradual pace this year.

The head of the BOE told the Treasury select committee that households were correct to think that interest rates will more likely rise than not but at a 'gentle' pace, comments from Carney that helped to boost the pound by almost 0.5 percent to $1.35 before it trimmed gains in late trading.

The sterling pound has declined sharply since mid-April when it hit highs not observed since before the Brexit referendum, amid a softening inflation outlook that has analysts raising doubts whether the central bank would remain on its rate-increasing course. Earlier this month, the BoE left rates unchanged and gave little hints on how it would proceed.

Carney said despite the Monetary Policy Committee's view that the underlying economy has not weakened, the dismal Q1 statistics gave rate-setters some reason to step back.

Other Monetary Policy Committee members shared the governor's view that the weakness in the first quarter was likely to be short-lived and growth was expected to rebound to 0.4 per cent in the second quarter.