• BOE's Pill: Inflation shock to translate into second-round effects

Market news

6 July 2022

BOE's Pill: Inflation shock to translate into second-round effects

"Much remains to be resolved before we vote on our august policy decision,"  Bank of England Chief Economist Huw Pill said on Wednesday, as reported by Reuters.

Additional takeaways

"'act forcefully' line reflects the willingness to act faster while emphasising conditionality."

"We are talking about rate hikes, not cuts."

"Line on 'scale, pace, timing' reflects a flexible approach."

"Unanimity about the short-term interest rate outlook no longer exists on MPC."

"Case for maintaining forward guidance to a smooth transition to tightening cycle much diminished."

"Likely inflation shock will translate into second-round effects."

"This threatens to create more persistent inflation dynamics in the UK."

"MPC weighing up immediate inflationary impact against medium-term disinflationary impact."

"MPC's framework defines a difficult narrow path."

Market reaction

The GBP/USD pair edged slightly higher after these comments and was last seen rising 0.2% on the day at 1.1980.

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