BoE Bailey leaves door open for an aggressive rate hike

Reuters is reporting that Governor Andrew Bailey spoke on Tuesday and said the Bank of England’s Monetary Policy Committee will bring inflation back down to its 2% target from more than 9% now.

“The Committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response,” Bailey said in a speech hosted by OMFIF, a central banking think tank.”Bringing inflation back down to the 2% target sustainably is our job, no ifs or buts about that,” he added.

Key comments

Bank of England’s bailey: still the case that UK businesses are very focused on the difficulty of hiring.

Pick-up in pay is still largely being driven by one-off bonuses rather than a higher base rate.

Inflation should come down rapidly next year.

If we see evidence of inflation persistence, we will act forcefuly.

Options other than 25 bp rises are on the table.

We will set out our thinking on gilt sales on Aug. 4.

We would not sell gilts into distressed markets.

BoE balance sheet should not remain permanently large.

UK finance ministry’s approval of qe is a ‘very mechanical’ process.

I have never had any dialogue with UK finance ministry on substance of qe decisions.

BoE independence on qe decisions has never been called into question.

We will clearly need an open market tool during qt when we get close to equilibrium.

GBP/USD update

Despite the hawkishness, the pound has started to give back the gains made in the New York open which ran up to break 1.1900 in a strong impulsive move to take on Toyo’s highs but falling just shy of Friday’s low. This leaves 1.1950 vulnerable for the day’s ahead if bulls were to commit and emerge again from within any pullback over the coming sessions.

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