BOE Bailey is speaking on a panel with ECB's Holzman and ECBs Nagel.

Comments from Bailey

  • BOE is prepared to increase rates again if needed
  • Policymakers can and must take the actions needed to return inflation to target over a period that avoids unnecessary volatility
  • UK has tight labor market, not rapid demand gains
  • we are in a period of rising energy, goods, and some food prices; this is by far the main cause of high inflation and is painful
  • monetary policy cannot stop inflation implications from pandemics and wars
  • we are facing a very big negative impact on real incomes caused by the rise in prices of things we import, notably energy
  • we have a very tight labor market with the labor force shrinking around 1% since the onset of Covid
  • we've raised the official rate 4 times so far and it make clear that in order to bring inflation down to target, we are prepared to do so again based on the assessment of each of our meetings

Here is the link with the prepared remarks.

The  GBPUSD  remains little changed from initial comments which are in line with the MPC. Trades at 1.2571 currently.

Recall from last week during a testimony Bailey said:

  • over 80% of UK inflation overshoot is due to energy/tradable goods
  • I am not happy about inflation outlook, this is a bad situation to be in
  • it is accepted practice to accommodate supply shocks 1 of they are transient and focus on a 2nd round of facts
  • a key question is whether self sustained momentum and domestically generated inflation will remain even as Slack in the economy is expected to open up
  • I do not think we could reasonably have done anything differently on monetary policy
  • Latest Chinese data this morning was very weak longer delay between real income squeeze leading to weakness in demand and a turnaround in the labor market means more risk higher inflation expectations become embedded
  • Not out of place to describe Covid impact on demand patterns in the UK as transient, unlike in the US
  • Expects unemployment rate to come down from its current 3.8% range
  • Labor force has been decreasing. The persistence and scale has been a surprise to us and is significant