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GLOBAL POLITICAL RISK

Modi, AMLO Top Major Economy Leader Poll, Macron Last

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Trend Condition Remains Bearish

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  • Huw Pill is widely regarded as one of the members who will be voting for a Bank Rate hike relatively soon. Indeed, his the following comment from the FT seems to suggest he will vote for a hike relatively soon (he does not specify when).
  • "The big picture is, I think, there are reasons that we don't need the emergency settings of policy that we saw after the intensification of the pandemic.. The settings [of monetary policy] that we now have are supportive settings. The need for support has diminished, as this [policy] bridge [to the other side of the pandemic] has been built and largely traversed."
  • However, perhaps more importantly he said that "maybe there's a bit too much excitement in the focus on rates right now."
  • This is the first time one of the more hawkish members of the MPC has made any attempt at talking markets down.
  • The MNI Markets team has argued that there has been too much priced into the short sterling curve and 1.25% Bank Rate by the end of 2022 seems too aggressive to us. And Pill's comments today reinforce our view.
  • The short sterling strip is opening higher this morning with the Dec22 contract 4 ticks higher at the time of writing, and now not quite fully pricing 1.25% by the end of next year.
  • We still think the curve is likely to flatten further from here, particularly through the Whites and Reds eventually, and note that we are still fully pricing hikes at the next three MPC meetings.