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Cunliffe hints at further rate hikes by saying BOE will do what is "necessary"

BOE
  • Highlights below from Cunliffe's BBC Radio 4 interview. He gives little away other than saying the BOE will do what is necessary to stop inflation expectations being embedded - he gave no more explicit expectation of future voting intentions or the path of Bank Rate, but did at least sound as though he would for a hike at the August meeting. As he is considered one of the most dovish MPC members (alongside Tenreyro) this in itself is notable, but probably expected already.
  • Cunliffe asked if BOE is behind the curve - said they started hiking in December before other DM central banks.
  • Then asked a loaded question saying that rate hikes have been small.
  • Cunliffe says different factors are affecting different economies. Says doesn't want to leave inflation as the new normal and embedded and that Bank will act to give people confidence.
  • Cunliffe says looking at domestic pressures and can't impact international factors such as food prices.
  • Asked about whether "domestic factors" means wage rises he says "we're not responsible for industrial relations... Those are decisions taken by firms up and down the country...we set the economy conditions in which pay bargaining takes place and in which companies decide whether to pass on prices... Will use tools to ensure economic conditions are not those where inflation becomes embedded in the economy."
  • Cunliffe asked if higher unemployment is necessary to squeeze out unemployment. Says at the moment international factors are driving inflation at the moment and those rises won't last for ever. As that chock passes, econ conditions must not allow a wage-price spiral and that's where BOE will do what is necessary.
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