Sterling fell to a 31-year low yesterday on fears of a “hard” exit by Britain from the European Union and Prime Minister Theresa May’s comments on the impact of loose monetary policy, which some saw as a thinly veiled attack on the Bank of England.

Ms May, in a speech to Conservative Party delegates on Wednesday, raised the issue of the side effects of ultra-low interest rates and money-printing.

Although her spokesman later played down suggestions that she was signalling changes ahead in monetary policy, it led to speculation the government was against further interest rate cuts, given the adverse impact on savings and pensions.

As a result, gilts came under pressure, with the 10-year yield jumping to its highest since mid-September and trading above levels seen on August 4, when the Bank of England (BoE) cut interest rates to record lows and announced an asset-purchase programme to boost growth.

Some saw her comments as unusually blunt and an attack on the BoE’S independence, raising more uncertainty for the currency, which has been under pressure for months.

“If you threaten the independence of the BoE, that’s a really big mistake,” said ex-BoE policymaker David Blanchflower.

“There are consequences and costs to threatening the independence of the bank. There are costs to the country.”

Asked whether Ms May’s comment was an attack on Mr Carney and the bank, he said: “Of course it was, what else could it be? If Mr Carney says I’ve had enough, that would be a major negative shock to the markets.”

Mr Carney, whose five-year tenure runs to 2018, has been criticised by some political figures, who say he tried to frighten the electorate into voting to stay in the European Union in a referendum held on June 23.

British Finance Minister Philip Hammond tried to calm nerves, telling Bloomberg Television yesterday that he would like Mr Carney to serve a full eight-year term at the central bank, rather than leave in 2018 as he originally agreed.

SEB currency strategist Richard Falkenhall said Ms May’s comments should be seen in the light of recent criticism by politicians of ultra-easy policies by central banks.

In the US, Republican presidential candidate Donald Trump has accused the Federal Reserve of keeping interest rates low because of political pressure from the Obama administration.

“Central banks have been independent in most Western economies for a few decades now, but we are seeing a shift in politicians’ views of late. We have to take May’s comments in that perspective,” Mr Falkenhall said.

Sterling fell one per cent to $1.2622 with a Reuters poll released yesterday predicting more losses are in store.

The currency has lost 2.5 per cent this week, hurt by Ms May’s announcement on Sunday that the formal process to take Britain out of the EU will start by the end of March.

The euro hit a five-year high while sterling’s trade-weighted index was stuck near lows last seen in early 2009.

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