Sterling rose 1.04 per cent against the dollar after the Monetary Policy Committee (MPC) member gave strong signals that an interest rate rise is imminent. Yesterday, the MPC voted to hold rates but hinted that they could be hiked soon.
“Until recently, I thought the appropriate response of monetary policy was to be patient, given modest growth and subdued underlying inflationary pressure,” Vlieghe said today in a speech to the Society of Business Economists.
“But the evolution of the data is increasingly suggesting that we are approaching the moment when Bank Rate may need to rise.
“If these data trends of reducing slack, rising pay pressure, strengthening household spending and robust global growth continue, the appropriate time for a rise in Bank Rate might be as early as in the coming months.”
The stronger pound has driven the FTSE 100 lower, and it's currently the worst performer in Europe, according to David Madden at CMC Markets.
"The British market started off in the red today because of the more hawkish than expected update from the Bank of England yesterday, and the speech from Gertjan Vlieghe a short time ago, accelerated the move," he added.
"Mr Vlieghe also hinted at a tighter monetary policy, which pushed the pound higher, and drove the FTSE 100 lower."