Pound near 7-year highs on BOE inflation report

London

STERLING rose towards seven-year highs and gilt yields surged on Thursday after a Bank of England (BOE) quarterly report said inflation would return to its target of 2 per cent in two years' time, keeping alive expectations of a first rate hike in early 2016.

Investors are starting to factor in a chance of the first hike in about 11 months, compared with 12 months before the report was released, based on the overnight sterling overnight interbank average rates.