MNI BRIEF: BOE Bailey: Don't Get Carried Away On UK Rate Hikes

The "key message to markets was not to get carried away" in anticipating interest rates hikes, Bank of England Governor Andrew Bailey told the Treasury Select Committee Wednesday.

Bailey and colleagues from the Monetary Policy Committee pointed out to the TSC that if policy remained on hold the BOE's forecasts showed an inflation overshoot in years two and three of the inflation forecast, but on current market expectations for Bank Rate to head to 2% it would undershoot substantially, as BOE Deputy Governor Dave Ramsden pointed out in his most recent speech.

They all agreed that the equilibrium longer term interest rate, estimated by the Bank at 2-3% nominal the last time it studied it in full in 2018, had not gone up and may have come down (MNI INSIGHT: R-Star Falls Out Of Favour As BOE Tightens). MPC member Silvana Tenreyro was dismissive of the view that policymakers should move the Bank Rate swiftly up to 2-3% to have policy space for future cuts. "You don't create a recession to have more policy room later," she said.