UPDATE 3-Bank of England steers markets on rates at Carney debut

Thu Jul 4, 2013 12:36pm EDT
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* BoE: markets are pricing in too fast a rise in UK rates

* Carney, at first rates meeting, takes steps on guidance

* Bond yields and pound slide, share prices rally on news

By William Schomberg and David Milliken

LONDON, July 4 (Reuters) - The Bank of England warned investors on Thursday they were being too quick to bet on higher interest rates as new governor Mark Carney began to deploy his favoured strategy of giving guidance on the policy path ahead.

Just four days after the Canadian took over at the British central bank, he surprised markets by persuading fellow policymakers to issue a statement to show it was in no rush to raise rates, given Britain's weak economic recovery.

"The implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy," the Monetary Policy Committee said, showing its concern about a recent jump in bond yields in financial markets.

As expected, the MPC voted to leave monetary policy unchanged this month.

Sterling slumped and British share and bond prices rose after the statement, which also suggested that more detailed guidance on monetary policy might come as soon as next month.   Continued...