Further sterling strength may hurt recovery warns Bank of England
The Bank of England said on Thursday, Britain's economic recovery may be at risk if sterling strengthens much further, in its first noteworthy hint of apprehension about the British currency's current rise.
The central bank's Monetary Policy Committee (MPC) said the 2 percent appreciation in sterling over the earlier month reflected a stronger economic outlook, but that greater strength could jeopardise British exports.
The MPC said in minutes of its December 4-5 meeting "Any further substantial appreciation of sterling would pose additional risks to the balance of demand growth and to the recovery."
Against other currencies Sterling is near a five-year high, and the central bank said that for Britain's "burgeoning" economic recovery to be sustainable, it needs to rely more on business investment and exports and less on consumer demand.
The nine-member MPC was unanimous in their decision to keep interest rates on hold at 0.5 percent and to leave the central bank's 375 billion pound stock of bond purchases untouched.
The policymakers said stronger sterling, and government steps at the start of December to limit household energy bill rises, had made the inflation outlook better. Consumer price inflation was 2.2 percent when the MPC met, and has since fallen to 2.1 percent.
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