The Bank of England warned Wednesday that recent strong gains in the pound could pose a threat Britain’s economic recovery.
The minutes of the bank’s December meeting said that while sterling''s 2% appreciation during the previous month reflected a stronger economic outlook, further significant gains could jeopardize export growth.
"Any further substantial appreciation of sterling would pose additional risks to the balance of demand growth and to the recovery," the minutes said.
The central bank said that for the U.K.’s economic recovery to be sustainable it needs to rely more on export growth and business spending and less on consumer demand.
"Beyond the near term, it seemed likely that, for the recovery to be sustained, a pickup in business spending would be necessary," the bank said.
The minutes also noted that the stronger pound had helped to bring inflation closer to the bank’s target of 2%.
Data released on Tuesday showed that the annual rate of inflation in the U.K. fell to a four year low of 2.1% in November, slowing from 2.2% the previous month.
The Monetary Policy Committee voted unanimously to keep interest rates on hold at 0.5% and to leave the central bank''s GBP375 billion asset purchase program unchanged this month.
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