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A busy period for MPC speakers (2/3)

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  • In terms of other MPC speakers last week, Governor Bailey’s comments got quite a lot of market focus, but we don’t really think there is much of a change of view here. The main points that were picked up on were that he said inflation would see a “big drop” in April and that inflation and labour market data is broadly where the Bank forecast it to be.
  • These comments were both seen as dovish by the market but the former was referencing the drop in energy prices in April (rather than the inflation print of that day, and which is already in the February MPR forecasts) while the latter was comparing the performance of the February forecasts to previous forecasts from the Bank – so a 0.1-0.2ppt surprise to wage growth is a huge deal to the market but not such a big deal to the Bank.
  • He did say that there appears to be some loosening of the labour market and that there is a big wage component in services CPI and that is expected to come down as inflation comes down. So we wouldn’t say he was as dovish as the immediate market reaction at the time suggested, but it was another nudge in a continued dovish direction of travel.
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  • In terms of other MPC speakers last week, Governor Bailey’s comments got quite a lot of market focus, but we don’t really think there is much of a change of view here. The main points that were picked up on were that he said inflation would see a “big drop” in April and that inflation and labour market data is broadly where the Bank forecast it to be.
  • These comments were both seen as dovish by the market but the former was referencing the drop in energy prices in April (rather than the inflation print of that day, and which is already in the February MPR forecasts) while the latter was comparing the performance of the February forecasts to previous forecasts from the Bank – so a 0.1-0.2ppt surprise to wage growth is a huge deal to the market but not such a big deal to the Bank.
  • He did say that there appears to be some loosening of the labour market and that there is a big wage component in services CPI and that is expected to come down as inflation comes down. So we wouldn’t say he was as dovish as the immediate market reaction at the time suggested, but it was another nudge in a continued dovish direction of travel.