The British Pound Sterling, on Wednesday, June 28, rose to a three-week high and Britain’s FTSE 100 stock index fell, after Bank of England Governor Mark Carney said an interest rate rise was probably necessary and the bank would debate this “in the coming months”.
The pound jumped by well over a cent after Carney’s comments to hit $1.2971, its strongest since June 9, the day of the results of Britain’s parliamentary election. That left it up 1.2 percent on the day.
Speaking at a European Central Bank conference in Portugal, Carney said policymakers would need to look at the extent to which stronger business investment offset a slowdown in consumption, as well as growth in wages and labour costs.
The remarks showed a shift in emphasis since a speech last week when Carney said now was not the time to raise rates. He did not repeat that phrase on Wednesday, and markets immediately priced in a greater chance of an earlier-than-expected rise.
Short sterling interest rate futures plunged, particularly across the mid-2018 to 2019 contracts, indicating a steeper path of interest rate hikes.
