- The justification for tighter policy is clear
- Whether interest rates have to rise by as much as currently priced in financial markets remains to be seen
- Full comments
There’s a slight pullback on market pricing for the BOE after his comments but nothing too material. After all, the immediate outlook remains the more important one here and a 75 bps rate hike is fully priced in going into the 3 November policy decision. OIS swaps show that a 100 bps rate move is now seen roughly at 15%, down from 25% earlier.
As for his headline comment, he’s talking about when the bank rate moves to somewhere around 5.25% and how that will result in a cummulative drag of GDP by almost 5% under the entire tightening cycle. As if the central bank will keep tightening when the economy is in such utter shambles. Pfft.