'Gradual rate rise' need not mean 'glacial', says MPC's Saunders

Carney hits the British Pound

Carney hits the British Pound

Saunders' comments come in stark contrast to Bank governor Mark Carney, who cautioned markets on Thursday that a rate rise in May is not a certainty.

Mark Carney said major decisions had to be taken on Brexit, including on the detail of the implementation period and the shape of a final deal.

Carney indicated that a rate hike this year was still "likely" but talked down suggestions that interest rates could rise next month, as had been widely expected.

Connor Campbell, financial analyst at SpreadEx, said: 'There was a slight improvement from sterling as Friday went on, thanks to a hawkish rebuke to Carney's Thursday dovishness from MPC member Michael Saunders.

"And then we will adjust to the impact of those decisions in order to keep the economy on a stable path".

"We'll sit down calmly and look at it all in the round". His justification is that although retail sales fell recently this was caused by the unusually heavy snow rather than a lack of confidence in the United Kingdom economy.

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Mr Carney added that there "will be some differences of view" at the May Monetary Policy Committee (MPC) meeting.

The strength of global growth would also be taken into consideration.

"Markets have been running away with themselves whilst inflation is in actual fact moving back towards the Bank of England's target rate of two per cent and Brexit uncertainties could also delay any hikes". Unfortunately that means in the short term that the speed limit is not increasing.

Listening to the governor, I sensed that he was a little more doveish on the possibility of an interest rate rise next month than he had been previously.

However, signs of a soft first-quarter economic performance were of "questionable" importance, given the role of bad weather and upward revisions to first-quarter growth in past years.

Previous tightening cycles had on average seen rates rise by a full percentage point over eight months, so "quite a wide range of paths. would qualify as gradual relative to that experience", Saunders said.

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