Wage Data Set To Factor Into Bank’s “Rough & Hard-To-Quantify” Inflation Projections

In the wake of today’s much firmer than expected labour market data (punctuated by strong wages readings) and ahead of today’s BoE speak (consisting of scheduled comments from Governor Bailey, Dhingra & Greene) we point you towards our policy teams’ latest insight piece, which was run yesterday and noted that “the failure of the Bank of England’s standard model to predict the recent upsurge in prices has left policymakers applying a rough and hard-to-quantify upside skew to projections for inflation as they hike rates whilst Bank staff struggle to incorporate a new wave of modelling and research into their projections.”

• A quick reminder that yesterday’s typically hawkish musings from BoE’s Mann highlighted her “very significant” concerns re: sticky core inflation, while fellow MPC member Haskel noted that his bias is to “continue to lean against the risks of inflation momentum.”
• The BoE-dated OIS strip now prices just over 120bp of further BoE tightening through year end, although terminal rate pricing remains well shy of the post-mini-Budget cycle highs (which were above 6.00%).