BoE Bank of England governor Bailey set out a mission for Thursday's press conference - to explain to the public why the BoE has had to raise rates amid rising living costs. His "guidance" is to the public and not the markets. This is a very different presser to how the Fed approached things last week.
The BoE has raised by 50bp because it is seeing inflation creep from energy and into the second round effects of wider pricing and wages. This should be an extremely bearish message to the pound - the BoE is having to raise rates into what it sees as an economy about to slump. The BoE's policy now becomes pro-cyclical in damaging growth (and prospects) further.
It's very hard to see anything good for UK assets out of this communication. As for Gilts, a slowdown in growth, a government looking at tax cuts (lower receipts) and a BoE that is raising rates, all points to much higher Gilt risk premium.
Comments