The Bank of England's Monetary Policy Committee (MPC) has warned that further substantial pound gains could weaken the UK's economic recovery.
Here's the relevant portion from the minutes:
In financial markets, there had been a slight tightening in monetary conditions, with UK longer-term market-implied interest rates rising by around 20 basis points and sterling appreciating by around 2% on the month. These developments were likely to reflect the relatively strong UK data.
The sterling effective exchange rate index was near the top of the range it had occupied since early 2009, and had risen by around 9% since its recent trough in March 2013. Although the extent of the final pass-through to domestic prices was uncertain, that appreciation would contribute to disinflationary pressure. But any further substantial appreciation of sterling would pose additional risks to the balance of demand growth and to the recovery.
No policy surprises though – the MPC voted unanimously to hold interest rates and asset purchases.
Inflation in the year to November came in at 2.1 per cent yesterday, a four year low (although above the Bank's two per cent target). Unemployment fell to 7.4 per cent for the three months to October.
On your marks, get set, go…. pic.twitter.com/JbtdAAYjF9
— Alastair McCaig (@AMcCaig_IG) December 18, 2013