Bank of England Governor Mark Carney said policy makers can look beyond the inflation slump and won’t wait too long before acting to return price growth to target. “Our job as the Monetary Policy Committee is to bring inflation back to the 2 percent inflation target, we will do so in a reasonable horizon,” Carney told lawmakers on Tuesday in London. “That horizon, given the nature of the shocks hitting the economy at present, should be within the next two years.” Sterling remained supported after Bank of England policymaker Martin Weale said earlier that the central bank could start raising interest rates sooner than markets anticipate. The “dollar weakness” after Yellen’s semi-annual Monetary Policy Report also helped the pair GBP/USD hitting the 1.5500 hurdle.
The euro erased earlier losses, with EUR/USD steady at 1.1337 after Greece’s package of proposed economic reforms was approved by its euro zone creditors on Tuesday, securing Athens an extension of its bailout for another four months. The package of measures includes taxation and public spending reforms and consolidating pension funds to reduce costs. Athens also pledged not to unwind state privatization programs and to stick to budget targets. Greece’s current €240 billion bailout was scheduled to expire on February 28. Earlier Tuesday, official data showed that euro zone consumer price inflation fell 0.6% last month, in line with expectations and unchanged from a preliminary estimate. Euro zone inflation declined by 0.2% in December.
The dollar trimmed gains against a basket of other major currencies yesterday, after downbeat U.S. consumer confidence data and as Federal Reserve Chair Janet Yellen said that rates will remain on hold for at least the next couple of meetings. Meanwhile, in prepared remarks released before her testimony to the Senate Banking Committee, Fed Chair Yellen said it was “unlikely” that economic conditions would warrant an interest rate increase for “at least the next couple of FOMC meetings”. She added that if the economy keeps improving as the Fed expects it “will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis.”