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By Andy Bruce and Peter Hobson
NOTTINGHAM, England (Reuters) - The Bank of England is not indifferent to the level of sterling, its governor said on Friday, giving a boost to the battered pound which has slumped in value since British voters decided to leave the European Union in June.
He also said the bank would tolerate slightly higher inflation than its formal target if necessary.
"Our job is not to target the exchange rate, our job is to target inflation," Mark Carney he said during a public meeting in the central English city of Nottingham.
"But that doesn't mean we're indifferent to the level of sterling. It does matter, ultimately, (for) inflation and over the course of two to three years out, so it matters to the conduct of monetary policy."
Sterling rose on Carney's comments, giving it a little relief after falling nearly 20 percent against the U.S. dollar since the referendum because of concerns among investors that Britain's economy will suffer from Brexit.
The pound briefly recovered all of the day's losses against the dollar , gaining half a cent to stand at $1.2252 immediately after the remarks. It also rose against the euro.
The BoE has previously signalled it is likely to cut interest rates below their already historic low of 0.25 percent in order to help the economy cope with the shock of the Brexit vote. But since those signals from the Bank, the pound has extended its slump which is likely to further push up the price of imports and Britain's inflation rate.
The BoE's next announcement on rates is due on Nov. 3.
Deputy BoE Governor Ben Broadbent, speaking at a separate public meeting on Friday in the city of Derby, said the fall in the value of the pound was important for inflation, but the BoE had to look at many factors.
LET INFLATION OVER-RUN "A BIT"
Carney said he was willing to allow inflation to run "a bit" higher than the central bank's 2 percent target in order to help employment and allow Britain's economy to grow.
British inflation is expected to rise above 2 percent in 2017 because of the sharp fall in the value of the pound. At the same time, the economy is expected to slow.
"We're willing to tolerate a bit of an overshoot in inflation over the course of the next few years in order to avoid (rising unemployment), to cushion the blow and make sure the economy can adjust as well as possible," Carney said.
He made the comments at a meeting with representatives of civic groups in the central English city of Nottingham, one of several being held on Friday by senior BoE officials to explain the work of the Bank to the general public.
Carney said the inflation environment in Britain was "going to change," making things more difficult for the country's most vulnerable households.
Speaking at a third public meeting in the city of Leicester, another deputy BoE governor, Minouche Shafik, said the world economy faced very high levels of uncertainty, partly due to high geopolitical risks.
"I have just got back from the annual meetings of the International Monetary Fund and the World Bank. I've been going to these meetings for 20 years, and this last meeting I went to is the one in which politics and geopolitics was discussed more than ever," she said.
(Additional reporting by David Milliken in Leicester and Helen Reid in Derby; Writing by William Schomberg; Editing by Jeremy Gaunt)
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