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Sterling hits 14-month high above $1.35 as BoE's Vlieghe signals early hike

Bank of England: Pound sterling steady as markets brace for first interest rates hike in over a decade


LONDON, Sept 15 (Reuters) - Sterling topped $1.35 for the first time in 14 months as a Bank of England policymaker reiterated that the central bank could raise interest rates in "coming months".

"If these data trends of reducing slack, rising pay pressure, strengthening household spending and robust global growth continue, the appropriate time for a rise in Bank Rate might be as early as in the coming months," Gertjan Vlieghe said in a speech.

The pound, already up half a percent on the day, extended its gains to hit a 14-month high of $1.3551, up over 1 percent on the day on Vlieghe's comments.

It also extended gains versus the euro to trade 0.9 percent higher at 88.07 pence.

Britain's FTSE 100 fell sharply to a session low, last down 0.6 percent, after Vlieghe's comments propelled sterling higher, weighing on the index's mainly foreign-earning constituents.

UK two-year gilt yields rose to 0.415 percent, their highest since before Britain voted last year to leave the European Union.

Germany's 10-year government bond yields turned positive on the day, following the rise in Gilt yields, at 0.42 percent.

The BoE said after a policy meeting on Thursday that it was likely to raise rates in the coming months if price pressures kept growing. (Reporting by Ritvik Carvalho; additional reporting by Julien Ponthus and Helen Reid, editing by Nigel Stephenson)