Second, the large movement in the Sterling-euro exchange rate represents an important stabilising mechanism by which the equilibrium real exchange rate depreciation associated with the downward shift in the relative economic prospects for the UK is partly attained through a step adjustment in the currency. It also shifts the financial terms of trade, with UK owners of foreigncurrency assets enjoying a valuation gain.
In particular, from the viewpoint of achieving the target “at the earliest possible time,” it was important for the Bank to take measures bold enough to be considered different from the measures in the past.