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Pound strengthens as Osborne holds to inflation target

Published This article is more than 2 years old.

The pound is up slightly today, after Britain’s chancellor of the exchequer opted not to tweak or call for a review of the the Bank of England’s inflation target of 2%. In his statement, George Osborne said:

This Budget confirms the primacy of price stability and the inflation target in Britain’s monetary policy framework. The updated remit reaffirms the inflation target as two per cent as measured by the twelve month increase in the Consumer Prices Index.

As we have written before, there was widespread anticipation that Osborne might tweak the inflation gauge to loosen—think Bernanke-like—monetary policy as a way to improve British growth. It didn’t happen. And the markets seem to be interpreting that—along with just-published BoE minutes that don’t signal more stimulus on the way—as reasons not to expect a flood of freshly printed pounds from hitting the market anytime soon.

To be fair, the strengthening in sterling today was pretty slight. The pound got a much bigger boost in recent days—reversing a months-long decline—as investors spooked by the Cyprus situation moved from the euro into other currencies such as the pound and the US dollar.

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