Mark Carney presents the inflation report by the BOE and repeats the main points. Regarding the all important timing of the first interest rate hike, he says it is all dependent, just like the Fed repeats again and again.
The pound remains depressed after the big blows. Only one member voted for a hike and the Bank talked about the strength of sterling as a worry regarding inflation. GBP/USD is up from the lows and eventually moves above 1.55.
Here are some highlights from Carney.
- Sterling strength a drag on inflation.
- No deflationary mindset
- 3/4 of fall in inflation related to volatile items, mostly oil.
- Degree of slack has fallen, seen in jobs
- To monitor closely upcoming developments and to adapt
- First rate hike eyed by
- First rate hike drawing closer
- But exact timing cannot be predicted in advance: data dependent.
From the Q&A session:
- Rate hike timing closer than perceived in the previous QIR in May.
- Signs of tightness in the labor market
- Some pickup in productivity – good news for the economy.
- Cannot interpret the recent employment news as negative.
- Lincoln speech his own personal view, not the MPC and his view hasn’t changed.
- We do not pre-commit.
- Financial markets action was not turmoil but only high volatility.
- Tightening financial conditions is the goal of raising rates.
- We have been disappointed by the time it has taken for productivity to rise. Coins “productivity puzzle”.
- Wage growth is more firmly grounded.
- Decision today consistent with what I said in Lincoln.
- Sterling moved up 20% in the past two years, with a big move in the past three months.
- Sterling has only been one of the factors. If it persists we will have to watch it more closely.
- Despite GBP strength, local demand is on the rise. This helps the pound.
- We trust the Statistics Office.
- UK consumer spending boosted savings and also incomes.
- Business investment has grown strongly in the past few years.
- Wages are expected to rise.
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