BoE Chief Economist Pill says there is still some work to do on the persistence of inflation; not unreasonable to believe that over the summer, the BoE will see enough confidence to consider rate cuts

• BoE is making good progress on returning inflation to target.


• Labour market remains "pretty tight" by historical standards.


• Pay growth data is consistent with a small decline in Q1.


• Rates of pay growth remain quite well above what would be consistent with meeting the 2% inflation target on a sustainable basis.


• Need to keep a restrictive stance on monetary policy that continues to bear down on domestic inflation persistence.


• Not unreasonable to believe that over the summer, the BoE will see enough confidence to consider rate cuts; could cut and keep the stance restrictive.


• 
  Question of when and how restriction is eased.


• Risk is loosening policy restriction too soon. 

Reaction details (09:12)

• As Pill spoke, and particularly following his comment around summer rate cuts, Sterling came under pressure with GBP/USD falling from 1.2555 to 1.2527 while EUR/GBP picked up a touch to just above 0.8600. Alongside this Gilt Jun'24 moved higher from 97.65 to 97.83 over the course of 10-minutes


• Note, the move in UK-related assets also occurred alongside a broader tilt in risk appetite with the USD picking up across the board, fixed income rising, US/European equity futures slipping alongside WTI/Brent coming under modest pressure.

Analysis details (08:46)

• As a reminder, Pill voted for an unchanged rate at the May meeting.


• Last Friday, Pill remarked that the MPC had sent a relatively clear signal that rates can be lowered when there is sufficient evidence of a downward path in persistent components of inflation.

14 May 2024 - 08:46- Fixed IncomeImportant- Source: Newswires