Mark Carney now moves on to the UK
- There are lots of caveats surrounding that comment
- There is still the possibility of plenty of shocks that can happen on the way
- Bank is looking at the household sensitivity to rate rises
A very bullish comment from Carney and the caveats have been ignored by the pound which shoots to 1.5567 from 1.5480
- We will learn about interest rate sensitivity as we adjust rates
- Rate rises will be gradual and limited
- BOE inflation target is symmetric
- UK rate rise cycles are much smaller then US cycles
- Households should begin to manage their finances in expectation of an upward move in rates (they should have been doing this for the last few years)
McCafferty comments now
- Changed vote for hikes due to inflation
- Policy is now finely balanced between raising and holding rates
- We have learnt a little more about the economy and wages
- Near term risks to inflation have been on the downside
- Further out sees higher inflation
- Chances of CPI going to -1.0% are slim
What hope have we got when McCafferty says that the difference in inflation between +5.0% and target is larger than the difference between -1.0% and the target? The target is 2.0% ;-)
