Former Bank of England policy maker Kate Barker believes that the Bank of England’s monetary policy committee (MPC) will be reluctant to raise interest rates if its members see in such move the threat of pound’s appreciation that will have negative impact on Britain’s economic recovery.

Barker notes that pound’s decline seen during the crisis was regarded as a very positive factor for the country’s economy. The specialist, however, is sure that British central bank doesn’t have target for the exchange rate.

Now it’s quite hart to make economic judgments, says the former BoE official. In her view, UK exporters, which have benefited from the pound’s 20% drop since the start of 2007, can afford some gains in the national currency.

One more danger of the potential rate hike that it will likely make the bond yields bounce affecting Britain’s growth even more severe. The yield on the UK’s 10-year has already reached 9-month maximum of 3.88%.

Anyway, lifting up rates or not, the BoE won’t make big moves, thinks Barker.

This year pound was up versus 15 of the U.K.’s 16 most-traded currencies helped by the rates hike expectations. Economists surveyed by Bloomberg believe that in 2012 pound will rise to 80 pence per euro.



Chart. Daily EUR/GBP

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