File image of Andrew Bailey, image © FCA, changed from original by Pound Sterling Live.

"Sterling gains ground to above $1.23 after Bank of England governor’s speech" - Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown.

There are concerns that the banking scare could lead to a more risk averse attitude among lenders, adding another squeeze to liquidity, just as companies are grappling with high interest rates.

Right now, worries about the impact of banking turmoil are taking a back seat and the Bank of England is intent on steering consumer prices lower.

Governor Andrew Bailey stressed in his speech in London last night that interest rates may have to move higher if there were signs of persistent inflationary pressure.

For now, policymakers don’t see a threat to financial stability in the UK, given that banks are resilient with robust capital positions.

The focus is on sticky prices and consumers are still in a jam with food price inflation hitting fresh record levels according to the British Retail Consortium.

"We have to be very alert to any signs of persistent inflationary pressures. If they become evident, further monetary tightening would be required. With this in mind, the MPC’s response will be firmly anchored in the emerging evidence. - Governor Andrew Bailey in a speech given to the London School of Economics on March 27.

Shoppers are paying 15% more for the same goods compared to a year ago, with fresh food inflation accelerating to 17%.

The prices for chocolate have rocketed, leaving a sour taste just in time for Easter, when confectionary eggs will be in high demand.

The pound has made fresh gains, amid expectations that another hike looks more likely in May, with fingers looking more likely to stay away from the pause button until mid-summer.

As sterling strengthens, it should help bring down prices, given the weakness in the pound over the past year is partly behind scorching prices, as it makes imports even more expensive, but it’ll take time to feed through.

The pound has gained 16% against the dollar since the disastrous mini-budget in September, but it’s still 12% lower than its level back in June 2021.

Market Report by Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown.