Comments from the BOE arch-hawk

  • Cyclical Factors Depressing The Neutral Rate Have Diminished
  • Brexit-Related Uncertainties Do Not Tie The MPC’s Hands
  • The Neutral Bank Rate Likely Stays Well Below Normal Level Seen Pre-Financial Crisis For Some Time
  • The Little Slack That Currently Remains Likely To Disappear Quite Quickly
  • Majority On MPC See Further Evidence Confirming Economy Is Running In Line With Forecasts
  • For Majority On MPC, Earlier Fears Of The Risks Of A Sharper Slowdown Have Diminished
  • UK Monetary Policy Is Determined By Where Bank Rate Sits Relative To That Neutral Rate
  • Neutral Interest Rate In The UK Fallen In Tandem With The Global Equilibrium Real Interest Rate
  • Justified In Allowing Bank Rate To Rise To Level That Then Allows Policy To Be Set Effectively In

Nothing out of the ordinary from McCafferty here. GBPUSD has ticked up around 10 pips to 1.3140. If anything, the comment on Brexit related uncertainties not tying the BOE’s hand is the most hawkish comment, albeit very very mildly. It’s basically saying the BOE will do what it needs to do regardless of Brexit, and in a time when the market is thinking about hikes, and given the mess surrounding May and her government, that’s a comment that will keep folks expecting hikes happy.

Ryan Littlestone

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