By Samuel Indyk
Investing.com – GBP/USD moved to its highest level in 3 days on Thursday after comments from Bank of England Monetary Policy Committee (MPC) member Gertjan Vlieghe. Vlieghe, who is due to leave the central bank’s rate setting MPC later this year said that an early interest rate hike could be appropriate if there is a smooth transition from the furlough scheme.
“Should the transition out of furlough happen more smoothly, with the unemployment rate at or a little below current levels by the end of the year, with associated signs of upward inflation and wage pressure beyond the temporary and base effects, then a somewhat earlier rise in Bank Rate would be appropriate.” Vlieghe said in prepared remarks at the University of Bath.
Even so, Vlieghe argues that it would probably take well into Q1 next year to have a clear view of the post-furlough world and rise in the Bank Rate could then be appropriate “soon after”.
The government’s furlough scheme, or Coronavirus Job Retention Scheme, is due to come to an end on 30th September this year. The government has provided a salary for millions of workers affected by the pandemic, including employed and self-employed workers.
The latest update from the UK government found that just 8% of the total workforce – or approximately 2.2mln employees – were receiving payments under the scheme, the lowest number this year, as sectors of the economy continue to reopen.
Vlieghe’s comments also supported GBP against the EUR as EUR/GBP dropped towards 0.8600 before finding support. But should his comments really be impacting the pound?
Vlieghe is due to leave his role on the Committee by the end of August this year, long before he expects the central bank to begin hiking interest rates. Vlieghe admitted this, saying he would not be part of the Committee when the time comes to raise the Bank Rate.
“Hence his comments don’t matter at all,” exclaimed Caxton FX Senior Market Analyst Michael Brown on Twitter.
GBP higher following comments from outgoing BoE member Vlieghe
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