Mark Carney now moves on to the UK

  • There are lots of caveats surrounding that comment
  • There is still the possibility of plenty of shocks that can happen on the way
  • Bank is looking at the household sensitivity to rate rises

A very bullish comment from Carney and the caveats have been ignored by the pound which shoots to 1.5567 from 1.5480

  • We will learn about interest rate sensitivity as we adjust rates
  • Rate rises will be gradual and limited
  • BOE inflation target is symmetric
  • UK rate rise cycles are much smaller then US cycles
  • Households should begin to manage their finances in expectation of an upward move in rates (they should have been doing this for the last few years)

McCafferty comments now

  • Changed vote for hikes due to inflation
  • Policy is now finely balanced between raising and holding rates
  • We have learnt a little more about the economy and wages
  • Near term risks to inflation have been on the downside
  • Further out sees higher inflation
  • Chances of CPI going to -1.0% are slim

What hope have we got when McCafferty says that the difference in inflation between +5.0% and target is larger than the difference between -1.0% and the target? The target is 2.0% ;-)