- We do not need to rush
- We are in a good place to be able to watch what’s happening in the economy
- There is time to understand the size of the shocks and also how the economy is evolving
- Should not be trigger-happy on rates
- Cannot wait forever but that doesn’t mean we need to react in June or July
Her comments are nothing that really jumps out of the page. She is a favoured member among her peers and one not to really stir up any drama at the central bank. After all, she’s been with the BOE for well over three decades now and has the potential to have her hat thrown into the ring to become the next governor.
She is preaching patience but at the same time wants to reaffirm optionality on future decisions. That is pretty much what all central banks are looking to do at the moment.
The US-Iran conflict continues to drag on and policymakers cannot be certain as to how long and how deep the impact from the war will run. Adding to that, they can’t also be certain of potential second round effects to inflation. So, the best thing they can do is try to buy as much time as possible to gain more clarity.
But from the way things are playing out in the Middle East, they definitely have their work cut out for them.
In terms of market pricing, traders are seeing a potential for a move next month with ~41% odds of a rate hike in June. By year-end, traders are pricing in at least two 25 bps rate hikes by the BOE with there being ~67 bps of rate hikes baked in currently.
On Breeden’s interview, the full transcript can be found here (may be gated).
