LONDON: Sterling fell against a rebounding US dollar on Wednesday but steadied against the euro as Bank of England policymakers warned that Britain's economy could suffer more damage than anticipated by the central bank last month.
The BoE said in August it expected Britain's economy to recover to its pre-Covid-19 size by the end of next year, but Bank of England Deputy Governor Dave Ramsden told lawmakers economic output would permanently be about 1.5 percentage points lower than it would have been without the pandemic and another interest-rate setter, Gertjan Vlieghe, warned of "a material risk" it could take several years for Britain's economy to return to full capacity. BoE governor Andrew Bailey told the lawmakers in Wednesday's closely watched online session that inflation might not be as weak as estimated by the BoE last month, citing evidence that many businesses had not passed on a value-added tax cut to customers. The speeches from five out of the nine Bank of England monetary policy committee members were being scrutinised by investors for fresh insight on negative interest rates and clues to sterling's direction. The BoE said last month negative rates are part of their monetary tool box but that it saw no immediate case to cut interests rates below zero. Britain's central bank has taken rates to record lows and ramped up bond purchases this year to support an economy hit by the coronavirus.
Sterling fell 0.6% against the dollar to $1.3301, having risen to an eight-month high above $1.34 the day prior. The pound was flat against the euro at 88.97 pence, having risen earlier in the day to a three-month high of 88.74 pence.-Reuters
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