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Saunders - Market pricing is appropriate

  • BOE MPC member Saunders has made some pretty hawkish comments in an interview in the Telegraph published on Saturday evening.
  • Saunders is one of two members who dissented at the last meeting to end asset purchases early. In the Telegraph article he says:
  • "I'm not in favour of using code words or stating our intentions in advance of the meeting too precisely, the decisions get taken at the proper time. But markets have priced in over the last few months an earlier rise in Bank rate than previously and I think that's appropriate.
  • "The February one is fully priced in and for December, it's half priced in. I'm not trying to give a commentary on exactly which one, but I think it is appropriate that the markets have moved to pricing a significantly earlier path of tightening than they did previously."
  • This is the first time since the September MPC meeting and the discussion in "Paragraph 65" that an MPC member has explicitly referred to market pricing.
  • As noted above, Saunders is one of the two most hawkish members of the MPC, so these comments do not come as a huge surprise. However, there has been a lack of pushback on market pricing from any other MPC member so far, which has helped underpin the selloff in sterling rates. And it now seems as though Saunders has implicitly confirmed he plans to vote for a hike in either December and/or February.
  • We would expect to see more downside pressure on short sterling rates (and also some benefit to sterling FX) as markets reopen after the weekend.

Full Telegraph article (behind paywall) here.

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