BoE Governor Bailey says he would caution against suggesting either that the BoE is done with hiking rates or that BoE will inevitably need to do more; have to monitor carefully how the tightening already done is working its way through the economy

• Further increase in Bank Rate may turn out to be appropriate, but nothing is decided.


• The incoming data will add to the overall picture of the economy and the outlook for inflation, and that will inform our policy decisions.


• Will reach conclusions with a determined focus on achieving the 2% inflation target on a sustained and lasting basis.


• Economy is evolving much as BoE expected.


• Monetary policy cannot make the shock to national real income go away.


• If BoE does too little with rates now, BoE will only have to do more later on.


• Must ensure that the situation does not get worse through homemade inflation taking hold.


• UK labour market remains very tight.


• At the Monetary Policy Committee’s February meeting, we made a very deliberate change to the way we described our view of the outlook. We moved away from what had effectively been a presumption at our previous meetings that further increases in Bank Rate would be required.

Via BoE

Reaction details (10:23)

• See analysis for details, but initially Gilts Mar'23 lifted from 99.63 to 99.82, before dipping to just below 99.50 - as the dust settles, Gilts have surpassed 100.00.

Analysis details (10:23)

• Initially, a dovish reaction was seen in Gilts/STIRs as Bailey said "he would caution against suggesting either that the BoE is done with hiking rates or that the BoE will inevitably need to do more". However, his subsequent remarks that if too little is done now (re. rates) they will have to do more later on and that they must ensure the situation does not get worse re. homemade inflation, left the door open for further tightening.


• Overall, Bailey's comments are very balanced with the Governor making clear that nothing has been decided and placing significant emphasis on upcoming data releases before the March MPC gathering, as data thus far has been broadly as the Bank expected. Ultimately, a dovish reaction has been seen as the remarks do not commit the BoE to further tightening - as was the case prior to the February meeting, when the Bank's forward guidance was altered.

01 Mar 2023 - 10:12- Fixed IncomeImportant- Source: Newswires