Bank of England's Bailey testifying
The testimony has begun in front of the treasury select committee. The GBPUSD is trading at 1.2260:
Highlights from testimony:
- over 80% of UK inflation overshoot is due to energy/tradable goods
- I am not happy about inflation outlook, this is a bad situation to be in
- it is accepted practice to accommodate supply shocks 1 of they are transient and focus on a 2nd round of facts
- a key question is whether self sustained momentum and domestically generated inflation will remain even as Slack in the economy is expected to open up
- I do not think we could reasonably have done anything differently on monetary policy
- Latest Chinese data this morning was very weak longer delay between real income squeeze leading to weakness in demand and a turnaround in the labor market means more risk higher inflation expectations become embedded
- Not out of place to describe Covid impact on demand patterns in the UK as transient, unlike in the US
- Expects unemployment rate to come down from its current 3.8% range
- Labor force has been decreasing. The persistence and scale has been a surprise to us and is significant
Bank of England's a Saunders:
- my hunch is that activity will be more resilient than the MPR forecast annual report to treasury committee
- we should lean strongly against the risk of high inflation expectations