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Pill's comments don't change the overall narrative

UK
  • SONIA has now retraced most of the moves seen around Pill's speech seen earlier today, with GBP FX also retracing most of today's strength.
  • Pill's comments on Monday that the conversation about cuts could start in the middle of next year (if there are no surprises to the data) was fairly heavily caveated and in response to a question.
  • Those comments were not repeated today (which probably spooked the market a little), but there is equally nothing to suggest that he has changed his view in any way. The rest of his comments were all in line with what was said on Monday - and the overarching message he is trying to convey is that now is not the time to discuss cuts and that the BOE still has a hiking bias as it sees the risks to inflation skewed to the upside.
  • If those upside risks do not materialise the Bank will likely start to change its communication at that point - and we think that was the message that Pill was trying to convey on Monday.
  • In the view of the MNI Markets team, we are unlikely to see any real meaningful shifts in tone until next year.

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