The BOE giveth, the BOE taketh away: fresh comments from the members of the Bank of England in a testimony hit the pound on the head. Carney says that the recent sterling strength is not supported by better competitiveness. Bean sees a case for a rate hike later than sooner. These are just the highlights.
GBP/USD falls from 1.7030 to 1.6980. Sterling is not so shiny against other currencies as well. EUR/GBP recaptured the 0.80 line.
Update: 1.6980 is gone as cable grinds even lower.
It was BOE member Charlie Bean that had the most dovish words to offer: he sees a case for later rather than earlier exit from stimulus.
This is very different from what Carney said just 10 days ago, and was echoed by his colleagues. Carney doesn’t even
Carney’s words in the current session do not counter Bean’s and are not hawkish. Carney says that wage data is softer than expected and that there is a productivity gap of 16% below the pre-crisis economic trend.
Carney also repeated the mantra that interest rate rises depend on the data and that they will be limited and gradual.
Slack capacity
The BOE reintroduced the term “slack capacity” to the jargon, and its members are referring to it right now as well:
- Carney says there is scope to absorb more slack before the rate rise
- Miles says that the spare capacity may be larger than 1-1.5% of GDP.
Here is how the downfall looks on the chart:
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