The BOE’s Pill is speaking and says:
- The 2nd round effects on inflation may be stronger
- They should be focused on attacking those 2nd round effects on inflation
- We must not allow ourselves to drift off into deep space of unmoored inflation dynamics
- They do not expect 2nd round effects to be as deep as 2022.
- Disinflation stalled before the Iran conflict.
- Latest GDP shows some robustness.
- Labor market weakness means 2nd round effects likely to be weaker than in 2022
- Not clear labor market is as loose as when there were oil price spikes in 2008 and 2011.
- Tighter financial conditions do not get BOE out of question of whether to raise rates itself.
- Prompt but modest increase in rates advantageous.
- Second round effects are behavioral, affected by what BOE does
- if you wait until market forces you to move, that would be more challenging to BOE
- Cannot say it now if rate rise would only be temporary or a plateau for rates
- We have to keep rates out for now
- Fiscal and global situation are influencing long-term market rates as well as inflation outlook
Pill is kinda speaking out of both sides of his mouth. He says he is concerned about 2nd round effects but sees slower labor keeping 2nd round effects as being contained.UPDATE: His most recent comments are more hawkish
The GBPUSD is trading to new session lows as the USD buying and the political uncertainty weighs on the GBP. The price is also breaking below the 100 day MA at 1.3481 . Recall from yesterday price bounced off that level.
The UK 10 year yield reached the highest level going back to 2008 this week at 5.13%. They are up from 4.233% on February 23rd (low for the year). That is up 90 basis points.
The US 10 year yield since its 2026 low at 3.926% is up to 4.447% currently after reaching a high this week at 4.50%. That is up 52 basis points. The yield is off recent highs from 2024 and 2025 which reached as high as 5.02%.
This article was written by Greg Michalowski at investinglive.com.
