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Pill's speech seems significant

  • This does seem to be a significant speech from Pill. Saying that he thinks "the time for cutting Bank Rate remains some way off" is a pretty explicit statement.
  • As we noted in our Inflation and Labour Market Insight earlier this month, we think that August is still looking as the most likely date for the first cut.
  • Even if inflation (and specifically services inflation) comes down faster than expected, we don't think this would be enough for the MPC to reach quorum to cut rates. We think they will only have enough confidence when private sector regular pay growth is more moderate.
  • Given that most wage rises come in effect in Q1/April (with the NLW rises coming in April), we think the MPC will want to wait for these data. We will have data on this up to April at the June MPC meeting (making that now look like the first potentially seeing a cut). However, given the revisions and the still lofty levels for wage growth, we expect the majority will want to see more than a first look at April data (and it's always helpful having a press conference and new forecasts in the MPR).- The Dec24 SONIA future has drifted 2.5 ticks higher since Pill starts speaking, but still remains 1 tick below yesterday's close.

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