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MNI (London)
--Tenreyro, Like Vlieghe, Sees Easing Likelier Response To Disorderly Brexit
By David Robinson
     LONDON (MNI) - In the event of a no-deal Brexit, an easing of monetary
policy was more likely than tightening, Bank of England Monetary Policy
Committee member Silvana Tenreyro said Thursday.
     Her comments align with those of her college, Gertjan Vlieghe. Other MPC
members have refused to attach any weights to the likely policy response to no
     The following are the key comments from Tenreyro's speech in Glasgow:
     --Tenreyro said that the policy response to a no deal, no transition period
would depend on the balance of the impact on supply, demand and  the exchange
rate. "In my judgement, a situation where the negative demand effects outweigh
those other effects is more likely, which would necessitate a loosening in
policy. But it is easy to envisage other plausible scenarios requiring the
opposite response," she said.
     --Tenreyro made clear that under current conditions, with the UK hit by
Brexit uncertainty, tightening is unjustifiable. "The effect of that Brexit
uncertainty on demand has become increasingly evident in recent months," she
     --Brexit uncertainty has led to investment falling in the UK, business
confidence slumping and hiring intentions declining and it is finally starting
to impact consumers. "We are .. starting to see some signs of its effect on
households; the housing market is weakening; consumer confidence has
deteriorated," she said. "With inflation close to target, demand weakening and a
wide range of possible outcomes regarding EU withdrawal, I saw little case for a
policy change in our most recent meeting," she added.
     --She left the door open to gradual tightening if there is a deal with the
EU resulting in a smooth Brexit, but even in this case she said she would need
to see further evidence of rising domestic inflationary pressure. "Following a
smooth Brexit, sterling would be likely to appreciate. Potential supply will
also be able to continue on its recent path, free of any immediate constraints. 
     --A stronger pound and continued supply growth would both limit the extent
that a recovery in demand feeds through into inflationary pressures," she said.
"So while I still envisage that in the event of a smooth Brexit we will need a
small amount of tightening over the next three years, before voting for any rate
rises I would want to be confident that demand was growing faster than supply,"
she added.
     --Her speech looked into stripping out exchange rate and tariff effects on
price data to get a cleaner take on inflation pressure. She said such a measure
of domestic inflation would be key in determining her policy decisions.
--MNI London Bureau; tel: +44 203-586-2223; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
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