The pound rose to $1.2936 against the dollar on Wednesday, signalling a 1% rise in the already volatile currency, after Carney said “some removal of monetary stimulus is likely to become necessary”.
The Bank of England governor spoke just a few weeks after his Mansion House speech in which he dismissed the need to hike rates amid weakening economic data.
However, since then the bank’s monetary policy committee surprised markets after three of the eight members voted for a rate rise.
Speaking at an ECB conference, Carney said: “The extent to which the trade-off moves in that direction will depend on the extent to which weaker consumption growth is offset by other components of demand including business investment, whether wages and unit labour costs begin to firm, and more generally, how the economy reacts to both tighter financial conditions and the reality of Brexit negotiations.”
ECB president Mario Draghi delivered an upbeat message on the health of the European economy.
Though he admitted “there are still factors that are weighing on the path of inflation”, he stressed these were mainly temporary factors and that persistent monetary accommodation was required for inflation to become durable and self-sustaining.
“The role of monetary policy in this growth story is clear,” Draghi stressed.
