BOE pill: Shouldn’t assume BOE would hike rates 50bps in September

  • We’re trying to make sure there’s an element of flexibility given the uncertainties we face
  • We need flexibility either to go further or to stay where we are
  • The pace at which we go further may vary depending on the circumstances
  • Dismisses criticism that the BOE was behind the curve to stop the inflation surge
  • Investors shouldn’t assume September would also be a 50 basis point rate hike

This was already communicated by Bailey at his press conference yesterday, but Pill brings a bit more color to it. That said, the statement itself was already pretty clear after the BOE pulled a page from the RBA’s playbook saying that “policy is not on a set path.” We are now in the second half of the central bank tightening cycle, that is, where the early aggression and frontloading are recalled as economic conditions deteriorate. For central banks, it’s about trying to navigate a ‘soft landing’.

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