Very interesting speech today from the Bank of England's Chief Economist, Andy Haldane.
The transcript can be found here:
The bit the market cares about is:
"I do not currently see an immediate case for
a policy change in either direction. If one
were required, given the asymmetry of
inflation risks, I think the chances of a rate
rise or cut are broadly evenly balanced. In
other words, my view would be that policy
may need to move off either foot in the
immediate period ahead, depending on which
way risks break."
It would appear that the BoE considers the deflationary threat to the UK is greater than the market has been pricing.
To be fair to Mr. Haldane, he has been putting out cautionary messages since last October, for example:
http://www.telegraph.co.uk/finance/economics/11168724/Andrew-Haldane-interest-rates-could-stay-low-for-longer-in-gloomier-economy.html
One thing is for sure, Short sterling rallied hard and the curve flattened as higher rate probabilities were loosened. Similarly the Pound has had a tough session against vs. EUR and USD.
That Haldane has upped the ante the day after the Fed dropped "patient" comes not as a great surprise. It would suit the BoE if the Pound were to decouple from the USD.
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