With sterling's sharp fall raising a red flag over the return of inflation to the UK economy, Bank of England governor Carney's appearance in Birmingham has markets on alert for hints on how his policymakers will respond to the sinking pound. Kate King reports.
"We are not indifferent to the pound we target inflation." The Bank of England's governor appearing rather indifferent himself 'though as he appearend at an economic conference in Birmingham. Earlier he warned, what many in Britain already knew that a financial squeeze is on its way as the falling pound, sends inflation upwards. The question now, how far will it go? SOUNDBITE (English) BGC PARTNERS MARKET STRATEGIST, MIKE INGRAM SAYING: "The head of Northern foods earlier on this week said he sees food price inflation at maybe 5 percent next year. Now that is going to hit households, particular those on lower incomes. At the same time you are going to have squeezed prices on fuel on oil even in dollars is on a rising trend at the moment, that's going to cut into real disposable income." Carney admits it's 'going to get difficult' for some. But his comments gave the pound a little relief after falling nearly 16 percent against the U.S. dollar since June's Brexit vote. Carney says he's willing to allow inflation to run "a bit" higher than the central bank's 2 percent target in order to prevent job losses. SOUNDBITE (English) BANK OF ENGLAND GOVERNOR, MARK CARNEY SAYING: "We are not going to have some magic number for it and it does factor into thinking as we are striking that right balance, in a period of adjustment and this economy is undergoing it has just started a period of major adjustment and what we all want is to make this as successful as possible." But the Bank of England may have backed itself into a corner. It previously signalled it's likely to cut interest rates below their already historic low of 0.25 percent in order to help the economy cope with the shock of the Brexit vote. Since then, the pound has slumped further and the bank's rate-setters know they can't curb inflation by raising interest rates without risking a hit to economic growth.