BoE can look through pound weakness, MPC's Saunders says

The pound may well yet have further to fall, but the Bank of England had scope to "look through" any impact that might have on inflation, even if it extended for several years.

"If such a scenario were to materialise then, provided inflation expectations and pay growth remain well-contained, I would expect the Monetary Policy Committee to largely look through any such direct effects of sterling weakness, even if they extend for several years, Michael Saunders said in a written submission to the Treasury Select Committee.

A "bumpy process" of withdrawing from the European Union might also result in much lower potential economic growth trends, he said.

Saunders also labelled himself as "fairly agnostic" on whether any further depreciation was likely.

"Given the scale and persistence of the UK's current account deficit, I would not be surprised if sterling falls further."

As of 1146 BST, the yield on the benchmark 10-year Gilt was down by five basis points to 0.98%, alongside losses in cable of 0.79% to 1.2263.