BoE policymakers soothe concerns of early rate rises

Bank of England policymakers calmed market expectations of early interest rate rises, saying that they wanted to avoid a marked economic slowdown which might pull the inflation rate below target.

While several Monetary Policy Committee members told a parliamentary committee they had considered raising interest rates at their last meeting to keep inflation down, the overall message of the testimony was balanced.

Markets, which have been pricing in interest rate rises this year, moved to discount a lower probability of this happening, especially after BoE Governor Mervyn King said the sharp gyrations in interest rate pricing had been puzzling.

While MPC members are clearly worried by the prospect of inflation rising past 4 percent this year and feeding into higher wages, they were also conscious that the economy was slowing and this would help tame price pressures.

Five members of the BoE's Monetary Policy Committee (MPC) were giving testimony to parliament's Treasury Committee on the central bank's May inflation report.

Asked about whether he was being dovish or hawkish, King said he did not know what level of interest rates would be required to get inflation to the 2 percent target. His recent comments, he said, were meant to be “balanced”