But not now
BOE Saunders is speaking and says:
- Possible that tightening might be needed in the future, but does not mean we need to tighten now
- Makes sense to wait and see how Brexit unfolds
- Assuming smooth Brexit, limited and gradual tightening probably needed over time
- effective latest BOEs rate hikes on household seem much smaller than usual
- weaker impact of recent rate rises suggests BOE may need to be more forceful one tightening or loosening policy in the future
- link between bank rate and changes in household finances less effective when bank rates are low
- BOE response to Brexit not automatic
- UK economy has recently slowed significantly
- Negative rates don't really work well. QE offers more scope
- gradual doesn't mean fantastically slow tightening
- probably would not change assumptions until government has firmer policy after Brexit
- Output gap is closing so policy should not be as loose as has been pointed out of Brexit risk
- Households would go back to recent trends if the Brexit deadline extended by couple of years (Is there a chance for Brexit being extended a couple of years? Hmmm).
- Rates could move either way after a No-Deal Brexit.
- He is certain that monetary policy could not prevent a no-deal Brexit from damaging UK economy
Saunders is more hawkish and his comments support that view. There is limited reaction in the GBPUSD.
