Mark Carney today quelled expectations for rate rises in the near term, citing weak consumer spending and "anaemic" wage growth as he warned that the "reality of Brexit negotiations" were yet to impact the economy.
Given the recent spike in inflation, three members of the Monetary Policy Committee (MPC) shocked the markets as they voted to raise interest rates at the last MPC meeting, however today, Carney has looked to suppress rate rise expectations making it very clear where he stands on the subject.
Naturally, the pound has taken a pounding and is currently sitting, at the time of writing, at 1.268 vs the dollar, falling just over 0.5%.
It is difficult to see why the market is so surprised by these comments given the backdrop of weak wage growth, poor consumer and business confidence and the unknown reality of the ongoing Brexit talks, however the market has reacted, and sharply.
It will be interesting to see if this sharp move is quickly absorbed by the market and the pound recovers, or if this is another leg-down in the longer-term decline of the pound. Either way, we have ensured that we have managed our exposure to UK domestically-exposed businesses, have prioritised UK overseas earners and continue to be broadly diversified across global markets. After all, it's worth reminding ourselves that the UK equity market only makes up c6.7% of the MSCI World global equity index.
Sorry folks, but those overseas holidays just keep getting more expensive!
"From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment," Mr Carney said.