Moving on to something useful at last
Inflation expectations are still consistent with the BOE's target
If they rise further then we would become more worried
Not a dovish comment but coming from a notorious hawk, a comment that inflation is not yet a major worry for him is GBP negative, and why the pound has fallen a touch.
Carney
- The overshoot in inflation is entirely caused by the currency factor
- If we start to see second-round effects on wage behaviour that would move us closer to our limit of toleration for an inflation overshoot
- Since Nov, there has been no uptick in market inflation expectations
- Short-term inflation expectations have started moving up, as would be expected but medium-terms expectations continue to run at long-term averages
- This is consistent with the market seeing a temporary overshoot in CPI
- Expects inflation to fall back in 2021 (predicting inflation 4 years down the line is pure folly IMO)
That's similar to the ECB's ignorance about inflation but at least they have given a factor (wages) that would push them to act. There's quite a lot of wage bargaining that's tied to inflation to it's a very real possibility of seeing wages jump with CPI.
