The pound edged lower after Broadbent provided a downbeat outlook for the economy, stating: “Most importantly for policy today, the international environment is clearly disinflationary.”
But sterling later recovered due to rumours of a UK clearer needing to convert dollars into sterling as part of its quarterly dividend payment.
Yet traders are eyeing the Bank of England’s move towards even looser policy, with Broadbent telling journalists that he nearly voted for more asset purchases at the September meeting of the monetary policy committee.
Broadbent took a loyal line on the Bank’s recent decisions, closely echoing the sentiment of its governor Mervyn King.
The Bank could have kept consumer price index inflation closer to its two per cent target, Broadbent said, but defended its loose stance. “Doing so would have meant an unacceptably high cost in foregone output and employment,” he said.
The Bank’s remit lends it flexibility to tackle inflation in the long run, Broadbent said.