Mark Carney at the BOE presser

  • Domestic CPI pressure likely to build in coming years
  • It isn’t where inflation is now but where it’s going that concerns us
  • CPi is unlikely to return to target without some increase in interest rates
  • The time has come to ease off of the accelerator
  • Int rate are one of many influences on the FX rate
  • Households are generally well positioned for a rate rise (they’ve no choice have they?)

Into the Q&A

  • Rate of growth is slower but not subdued
  • Worst of the squeeze on real incomes is at an end and a rate rise aims to ensure it doesn’t come back

GBPUSD breaks below the 1.3096 lows to 1.3083.

  • BOE sees two hikes over the forecast horizon to get CPI to target but it doesn’t quite get there
  • Our normal horizon for returning CPI to target is 18-24 months but we’re in exceptional circumstances

GBPUSD back to 1.3100.

  • We expect hike to be passed on to savers
  • Global economy is firing on 11/12 cylinders
  • Stance of global mon pol is changing
  • UK is in a relatively unusual period of underperformance compared to other major economies

I disagree with that last comment as we were one of the first to recover back in 2013. The US could just be following the same model of peak and pull back.

  • The most likely reason to adjust rates again (either way) is if we got some resolution of big Brexit issues
  • We want the bank rate higher than it is today before reversing
Ryan Littlestone

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