King Cools Expectations for Interest Rates Hike, Sterling Drops

The Great Britain pound weakened today after Bank of England Governor Mervyn King suggested that the Bank isn’t ready for the interest rates hike.
The inflation exceeded the target of the BoE for more than a year, causing the Governor to write the explanation to Chancellor George Osborne. This letter fueled hopes for the increase of the interest rates. King cooled these expectations today at the press conference about the Inflation Report in London:

The market has gotten it into its head that there would be three, maybe four interest rate hikes by the end of the year, but that’s too excessive. There is clearly a fear that there will be downside risks to the economy.

He also said:

Some people are running ahead of themselves in saying that we are pre-announcing, or we’re laying the ground, for a rate rise. That decision has not been taken and it won’t be taken until we get to the next meeting, or the following meeting and it may be many quarters before we do anything.

GBP/USD dropped from 1.6124 to 1.6037 today as of 16:18 GMT and GBP/JPY fell from 135.06 to 134.57.

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