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Short Sterling moves and BOE Comments (2/2)

BOE
  • Bailey's comments did, of course, sound as though he was considering voting for a rate hike, despite stating that one of the biggest drivers of inflation higher was likely to be energy price increases.
  • "Monetary policy cannot solve supply-side problems - but it will have to act and must do so if we see a risk, particularly to medium-term inflation and to medium-term inflation expectations… And that's why we at the Bank of England have signaled, and this is another such signal, that we will have to act… But of course that action comes in our monetary policy meetings."
  • As we have argued many times, we think that Bailey, Broadbent and Pill are the swing members on the MPC (with Saunders and Ramsden both expected to vote for hikes later this year). So in this sense Bailey's comments are significant.
  • Last week, we heard from Tenreyro who still sounded very cautious (and very focused on the labour market outcomes). She didn't sound completely against raising rates in the medium-term but certainly seemed to be inclined to wait for more information before she voted for a hike.
  • even more explicitly dovish comments came from Catherine Mann who said that she "can wait" to raise rates and that other broader financial conditions were already effectively tightening.
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