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Sterling extended the morning’s losses after the Bank of England adjusted its inflation forecasts and predicted a bigger than expected short-term slowdown in consumption.

At publication time the pound was 0.5 per cent weaker for the day, at $1.2875, having already wiped out early gains after disappointing industrial production data were released this morning.

The Bank of England suggested interest rates could rise towards more normal levels over the next three years if Brexit negotiations go smoothly, but said it had been overoptimistic about economic performance for the first half of this year.

In its quarterly inflation report, the Bank also said that inflation would be higher than it previously thought in 2017, though it expects it to fall back next year.

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