The pound climbed to the highest level against the dollar since just after the Brexit vote and gilts slid as Bank of England policymaker Gertjan Vlieghe stoked speculation of an interest-rate increase within months.
The Bank of England (BoE) has held the base rate at 0.25 per cent, following a 7-2 decision by the Monetary Policy Committee (MPC).
Vlieghe, who was the first BoE member to vote for a rate cut after the Brexit vote, is a renowned dovish voter on monetary policy and his change of stance was interpreted as being particularly significant by economists.
His opinion until recently was that patience was required on interest rates given modest growth and subdued inflationary pressure.
The Pound Euro exchange rate quickly soared in response, with markets considering this statement to be even more of an indication that a November rate hike might be probable.
"As expected, the central bank voted to keep rates unchanged this month, with Ian McCafferty and Michael Saunders the only voices of dissention".
Known for being the most dovish member of the MPC and wary of a rate rise, Vlieghe said he was "struck" by a number of developments in the United Kingdom, including employment growth, wage increases and rising inflation. The MPC's more hawkish language has caused sterling to jump to a 15-month high against the U.S. dollar.
Since then sterling has rallied, and after Vlieghe's remarks the pound was up 1% at $1.3533 - the highest level since 27 June 2016, just after the European Union referendum had driven the currency to 30-year lows.
Naturally this signal boosted the Pound across the board, with markets rushing to price in higher odds of a November or December interest rate hike from the BoE.
The Bank of England has hinted that interest rates may rise in the next few months, which could put further pressure on farming businesses.
Vlieghe said that wage growth was not as weak as earlier in 2017 and that he expected it to pick up further.
The committee has asserted that monetary policy "could need to be tightened" if projected inflation increases come to pass.
Analysts were caught off guard by the highest rate of inflation since May, as United Kingdom consumer households feel the impact of a weaker pound and slow wage growth.
"Rock bottom interest rates offer the ideal opportunity for homeowners to overpay on their mortgage, increasing equity in their home and bringing down their debt". The market has taken his comments to mean a quarter point hike is on its way, probably by the end of the year, building on the hawkish tone from the BoE yesterday.