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Bailey's speech in focus today

BOE
  • After last week's more hawkish than expected MPC meeting, the highlight of this week for the UK will be Bailey's speech later today which will be closely watched as to whether he clarifies "Paragraph 65" or is seen to push back on or endorse market pricing.
  • In our BOE Review (available here) we discussed that there had been widespread confusion as to why paragraph 65 had been included in the Minutes. The paragraph reads:
  • "All members in this group [of 7 who voted to maintain current policy] agreed that any future initial tightening of monetary policy should be implemented by an increase in Bank Rate, even if that tightening became appropriate before the end of the existing UK government bond asset purchase programme."
  • We think that the part of the comment referring to tightening before the end of the APF seems to be setting up the market for some potentially hawkish dissents on the Bank Rate later this year. However, it is not out of the question that it was a badly worded attempt by the MPC at purely underlining the August sequencing review. If the latter was the case, given the movements in market pricing since the meeting, today's speech seems a natural time for Bailey to push back on those expectations. If he does not, market pricing of an early hike is likely to be reinforced. Note that the text is due to be released at 16:00BST (with the speech itself scheduled for 19:00BST).
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