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- Title
Interpreting recent movements in sterling.
- Authors
Astley, Mark; Smith, James; Pain, Darren
- Abstract
The sterling effective exchange rate has depreciated significantly since the start of the financial market crisis in August 2007. Movements in sterling affect UK monetary policy via their potential impacts on CPI inflation prospects, where it is important to consider the reasons behind the change in the exchange rate. Sterling's movements potentially reflect a wide range of factors in the United Kingdom and overseas, in both the real economy and in financial markets. Indicative evidence suggests that sterling's depreciation reflected a combination of perceived changes to UK relative cyclical prospects, the perceived riskiness of UK assets and the apparent need for the UK economy to rebatance, the effects of which may have been amplified by financial market factors. But there is substantial uncertainty about the precise role of each factor.
- Subjects
UNITED Kingdom; FOREIGN exchange rates; FINANCIAL markets; FINANCIAL crises; MONETARY policy; DEPRECIATION; ASSETS (Accounting); ECONOMIC policy
- Publication
Bank of England Quarterly Bulletin, 2009, Vol 49, Issue 3, p202
- ISSN
0005-5166
- Publication type
Article