BoE's new Chief Economist Pill says that the balance of risks is currently shifting towards great concerns about the inflation outlook, as the current strength of inflation looks set to prove more long lasting than originally anticipated.

• Would emphasise that risks to the economic and inflation outlook are again clearly becoming two-sided.


• When asked if he thinks the criteria for policy tightening had been met says, after caveating the point is moot following the guidance being dropped, "For what it is worth, I would have judged the necessary condition embedded in the MPC’s forward guidance to have been met at the August meeting"
  


• The current plan to unwind stock of asset purchases remains the best way forward.


• 
  Negative interest rates are both feasible and likely to ease monetary conditions. But negative interest rates are no panacea. In the current institutional setting, there are limits to how far they can fall: probably 50 or 100bp of additional reduction in the Bank rate is now possible. This is not negligible; but nor is it transformational. Feedbacks may be smaller in the UK than in the euro area. As with other new monetary policy tools, this points to caution in believing they can be used to ‘fine tune’ macroeconomic developments. 


• Expects interest rates to remain at relatively low levels for the coming years, even as the impact of the Covid-19 pandemic recedes.


• Plans to re-focus efforts towards deepening understanding of the policy tools and frameworks that have emerged from the financial crisis and its aftermath (including the impact of the pandemic and the policy response to it).


• Intends to prioritise efforts to encourage greater diversity of approach within the policy preparation process, introducing more scope for challenges to the orthodoxies and assumptions embedded in the core framework.

via the BoE: Link 1 & Link 2.

Reaction details (10:25)

• In an immediate reaction to this commentary (particularly the initially circulated remarks around inflation) from the new BoE Chief Economist, GBP/USD rose from 1.3585 to a test a brief eclipse of the 1.3600 handle (high 1.3607), before dipping back to just above pre-release levels. In tandem, Gilt Dec'21 future fell from 124.86 to 124.60, before paring back around 10-ticks of the downside.

07 Oct 2021 - 10:18- Fixed IncomeImportant- Source: Newswires