The Guardian The Bank of England yesterday rejected calls for it to weaken sterling's value against the euro, warning a fall in the exchange rate could stoke up inflation. His remarks boosted the pound close to its recent six-month high against the euro of 60p.
Sterling is in pretty good shape.
Domestic demand in the UK is still robust, while the euro is plagued by growth and inflation worries. Sir Eddie said that the Bank had been surprised by the weakness of the euro, but that even if interest rates had been lower, as some manufacturing firms had demanded, the pound would not necessarily have fallen. Sterling's strength is posing a headache for supporters of early British entry into the euro. The government has ruled out targeting a lower rate and refuses to specify what it considers to be a competitive rate for entry. Even supporters of the single currency believe entering at current exchange rates would be economically unwise, risking a rerun of Britain's disastrous membership of the exchange rate mechanism.