Posted on Tuesday 24 June 2014 by Ulster Business

Pound slumps after central bank errs on side of caution

Bank of England Governor Mark Carney has dampened expectations of an interest rate rise anytime soon

The value of sterling dipped sharply on Tuesday after the UK central bank appeared more concerned about the economy than it had previously revealed.

Governor Mark Carney, in the Bank of England’s inflation report, said it was particularly worried about the growth of wages which, although the UK economy has picked up, have failed to keep pace with inflation.

That dampened growing expectations the bank was poised to raise interest rates as soon as the last quarter of this year, a move which would impact thousands of Northern Ireland borrowers on variable rate deals.

As a result, the pound fell by around half a cent back below $1.70.

Economists have warned the Bank of England may be forced to raise interest rates to cool a rampant housing market in the southeast of England before the Northern Ireland property market and economy has recovered fully.

Despite sterling’s slide, it still remains over 20 cents higher than a year ago, a situation which is good news for tourists from Northern Ireland heading to the US but makes life more difficult for exporters. A stronger pound means buyers using dollars need to pay more goods and services, forcing exporters to lower prices to compete.

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