BoE's Huw Pill commented on the latest macro data and how the narrative around the rate decision is currently shaping up.
Banker's highlights comments:
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Open account Try demo Download mobile app Download mobile app- UK inflation is too high
- The impact of interest rate rises will become fully apparent over time
- There is a risk that the BoE has not yet raised interest rates enough to combat inflation
- This is particularly highlighted on this front by high food prices, which are not showing sufficient downward momentum
- On the other hand, however, food price growth is expected to fall to 10% y/y by the end of the year
- Recent data indicate that inflation is showing signs of becoming more persistent
- The banker expects us to see real wage growth in the UK in the second quarter
- Inflation likely to fall to 5% end of 2023
- Inflation likely to return to target 1H 2025
The overall tone of the statement appears hawkish, nevertheless it is worth remembering that Huw Pill is seen as a hawkish representative of the Bank of England. However, it is worth noting the projected real wage growth in the UK, which, if it occurs and inflation actually proves to be more persistent, could lead to a prolongation of the monetary tightening cycle and thus increase the chance of a later, more persistent recession in the UK.
The GBPUSD pair is gaining close to 0.22% on a daily basis and is trading within the boundary set by the 50-day exponential moving average (blue curve). Source: xStation 5
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