The pound was little changed against the dollar and the euro after Bank of England policy maker David Miles said attempts to slow inflation too quickly risk stalling the economic recovery. Britain’s currency weakened versus the yen. Inflation “is likely to move higher in the near term, largely as a result of higher prices for domestic energy, before coming down again,” Miles said in a speech late yesterday at the London School of Economics. Bank of England officials said this month that the weakness in the economy may persist “longer than previously thought” as they kept the key interest rate at 0.5 percent. “Clearly at the moment the Monetary Policy Committee is moving toward a more dovish stance,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “I can’t see a rate hike in the next year. I think they will remain on hold until at least the second half of next year, and that will undermine the pound further.” The pound was little changed at $1.6354 at 9:40 a.m. in London. It reached $1.6439 yesterday, the most since June 14, before ending the day 0.5 percent lower. Britain’s currency was also little changed against the euro at 87.97 pence, and declined 0.2 percent to 127.04 yen. Data released yesterday showed an index of U.K. factory orders fell more than estimated and manufacturers’ optimism plunged to the lowest in two years. Sonia Forwards The U.K. economy barely grew in the second quarter, data this week showed, suggesting the central bank will keep rates at a record low to aid the recovery. Investors have pushed back expectations for the next rate increase to beyond June 2012, according to forward contracts on the sterling overnight interbank average. At the start of last month, they were betting on a February 2012 increase. Retailers saying sales volumes increased from a year ago probably outnumbered those reporting declines by 2 percentage points in July, compared with minus 2 points in June, a report due today is forecast to show, according to the median estimate of 10 economists in a Bloomberg survey. Sterling has fallen 8.6 percent in the last 12 months, making it the second-worst performer among 10 developed-market currencies after the U.S. dollar, according to Bloomberg Correlation-Weighted Currency Indexes. U.K. government bonds were little changed, leaving the yield on the 10-year gilt at 2.98 percent. Two-year yields were also little changed at 0.68 percent. To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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