BOE MPC's Saunders with scheduled speech 31 Aug
External MPC member Saunders voted for a rate hike last time out but says:
"We do not need to be putting the brakes on so much that th economy weakens sharply"
A change of mind for Mr S or just common sense prevailing?
- mon pol implications of a bump Brexit not automatic, could in theory go either way
Yep, thanks for the forward guidance again !
- CPI likely to rise to 3% in coming months
- preferable to have the space to move gradually on rates
- if we get behind the curve we lose that space
- does not a modest rise in rates to have a disproportionate effect on spending
- GDP likely to be revised up
- BOE not indifferent to GBP depreciation
"In the exceptional circumstances since the EU referendum, the MPC has sought the appropriate trade-off between above-target inflation and below-potential output. The terms of that trade-off have shifted markedly in recent quarters. Inflation has risen well above target, while spare capacity in the economy has been absorbed faster than expected. The jobless rate is now slightly below our estimate of equilibrium.
The prospective trade-off is beyond my limits of tolerance, with the likelihood of an early elimination of slack and an extended period of above-target inflation. We do not need to be putting the brakes on so much that the economy weakens sharply. But, our foot no longer needs to be quite so firmly on the accelerator in my view. A modest rise in rates would help ensure a sustainable return of inflation to target over time"
Full speech here
GBPUSD had a move back above 1.2910 but lower again at 1.2906 as is EURGBP at 0.9212 as EURUSD retreats from 1.1900
MPC's Saunders - Rates can still go either way
