Andrew Sentence, the member of the BoE Monetary Policy Committee, claimed today that the central bank’s inflation forecast released yesterday understate upside risks to inflation. Sentence called BoE inflation outlook “too optimistic”. According to him, in order to meet CPI targets there should be more rate hikes than expected.

According to British central bank, inflation will peak at 4.4% this year and before easing to the 2% target level by the middle of 2012 and then even lower. The outlook is based on BoE benchmark interest rate rising from a record low of 0.5% to 1% this year and 2% by the end of 2012.

Sentence’s hawkish comments made sterling rise to the day’s maximum in the 1.6130 area. If the pair GBP/USD consolidates above 1.6120, next resistance levels may be founded at 1.6185 (February 7 and 16 maximum) and 1.6230 (February 2 maximum). Support levels are situated at 1.6075/85 (session minimums), 1.5985 (February 16 minimum) and 1.5960 (February 11 minimum).



Chart. H4 GBP/USD

More info about FBS