Comments from Michael Saunders in London

  • BOE has not gone soft

  • Prospective inflation pressure does not imply that the UK will face persistently high inflation

  • It's natural for mon pol to respond to a changing economic outlook consistent with a low inflation goal

  • Current policy is clearly accommodative and would provide stimulus even after a modest rate rise
  • Most evidence points to growth in Q1 despite the retail weakness
  • UK could maintain 2% annual growth rate across 2017 & 18 even with consumption weakness
  • Large depreciation of sterling will have powerful effects on the economy over the next year or two
  • Expects to see higher inflation and a greater shift from consumption to investment and exports than the BOE forecast in Feb
  • Would not be surprised to see inflation hit 3% late in 2017 or early 2018, which is above BOE forecasts

Some very mildly hawkish comments from Saunders. There's no mention of tolerance levels for inflation but he's taking the line that a hike isn't dependent on the Brexit outcome nor would one mean that the BOE would stop stimulating via its re-investment of QE.

No huge move in the pound but it's moved the wolves from the 1.2770 door.