1 00:00:02,400 --> 00:00:07,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news you haven't heard. Thank 2 00:00:07,640 --> 00:00:09,520 Speaker 1: you so much for speaking to Bloomberg. Now. You've been 3 00:00:09,600 --> 00:00:13,520 Speaker 1: quite direct and suggesting that the BOE may cut rates 4 00:00:13,560 --> 00:00:16,000 Speaker 1: more sharply though the markets are expecting. Is that because 5 00:00:16,000 --> 00:00:20,119 Speaker 1: you're worried that markets won't be prepared for what's to come. No. 6 00:00:20,239 --> 00:00:24,680 Speaker 2: I think our forecasts are conditional on a number of things. 7 00:00:24,680 --> 00:00:26,920 Speaker 2: But one of the things that obviously our condition on 8 00:00:27,240 --> 00:00:30,400 Speaker 2: is we use the market curve to set them up. 9 00:00:31,600 --> 00:00:33,599 Speaker 2: So I think it's important that we know if we 10 00:00:33,680 --> 00:00:39,800 Speaker 2: find the forecast with the market curve produces the best judgment, 11 00:00:40,120 --> 00:00:43,159 Speaker 2: which has inflation below targets or above target, but not 12 00:00:43,200 --> 00:00:47,720 Speaker 2: to target at the at the sort of horizon we say, 13 00:00:47,720 --> 00:00:49,840 Speaker 2: so we say this is where we got to best 14 00:00:49,880 --> 00:00:55,240 Speaker 2: collective judgment. Is that now it follows I think that 15 00:00:55,600 --> 00:00:59,080 Speaker 2: this is a comment I made earlier that what we're 16 00:00:59,080 --> 00:01:01,360 Speaker 2: saying is if and if it is of course critical 17 00:01:01,400 --> 00:01:05,240 Speaker 2: here if the world evolves as you know that that 18 00:01:05,280 --> 00:01:08,800 Speaker 2: forecast suggests it was, well, probably the case would be 19 00:01:08,880 --> 00:01:12,679 Speaker 2: there for a less restrictive path of policy is conditional. 20 00:01:12,800 --> 00:01:15,960 Speaker 1: Everything is conditional. Is June and live meeting, all meetings alive, 21 00:01:17,040 --> 00:01:19,840 Speaker 1: So is June likely that's a different question. 22 00:01:22,720 --> 00:01:24,759 Speaker 2: I think the key points I would make is that 23 00:01:24,840 --> 00:01:29,680 Speaker 2: we have changed our view on the likely persistence of 24 00:01:30,080 --> 00:01:34,399 Speaker 2: inflation on the second round effects, and it's good news. 25 00:01:34,440 --> 00:01:37,120 Speaker 2: We think that we think there's there's evidence there to 26 00:01:37,160 --> 00:01:39,000 Speaker 2: suggests they will be less pronounced than we thought they 27 00:01:39,000 --> 00:01:42,120 Speaker 2: would be. But that's a judgment. And for me, I'm 28 00:01:42,120 --> 00:01:47,720 Speaker 2: now looking at particularly streaking indicators services, inflation, pay, and 29 00:01:47,880 --> 00:01:50,040 Speaker 2: the quantity side of the labor market to really judge 30 00:01:50,040 --> 00:01:52,080 Speaker 2: this persistence question, how it will. 31 00:01:51,960 --> 00:01:54,880 Speaker 1: Evolve the governor. Because you were up quite upfront about 32 00:01:54,880 --> 00:01:58,680 Speaker 1: market expectations, does that come from Ben Bernanke's review that 33 00:01:58,760 --> 00:02:00,920 Speaker 1: you will talk more about the more is to indicate 34 00:02:01,000 --> 00:02:03,320 Speaker 1: more to the markets. Also, what you're doing next, Well, 35 00:02:03,320 --> 00:02:03,600 Speaker 1: we're not. 36 00:02:03,560 --> 00:02:06,440 Speaker 2: Going to We're not going to implement the monanky review piecemeal, 37 00:02:06,560 --> 00:02:09,040 Speaker 2: so we was going to spend a few months really 38 00:02:09,040 --> 00:02:11,720 Speaker 2: sort of thinking quite hard about what we do. And 39 00:02:11,760 --> 00:02:15,000 Speaker 2: he raised the conditioning assumptions as a point. Actually, and 40 00:02:15,160 --> 00:02:18,240 Speaker 2: this question which I think all central banks wrestle with 41 00:02:18,360 --> 00:02:21,560 Speaker 2: in various ways, which is how do you actually sort 42 00:02:21,600 --> 00:02:25,800 Speaker 2: of represent a future profile of rates to set up 43 00:02:25,840 --> 00:02:29,160 Speaker 2: your judgment without sort of getting yourself into position where 44 00:02:29,160 --> 00:02:31,639 Speaker 2: you absolutely nailed on, as it were, for a view 45 00:02:31,639 --> 00:02:33,400 Speaker 2: of rates two years out, which of course is just 46 00:02:33,440 --> 00:02:35,040 Speaker 2: not realistic to commit to. 47 00:02:35,360 --> 00:02:38,280 Speaker 1: But can we expect more market commentary from you going. 48 00:02:38,120 --> 00:02:41,560 Speaker 2: Forward, Well, we had a particular I think we're in 49 00:02:41,560 --> 00:02:45,160 Speaker 2: a particular situation at the moment. I've said before it's 50 00:02:45,160 --> 00:02:46,880 Speaker 2: a high bar I think for us to sort of 51 00:02:46,919 --> 00:02:51,399 Speaker 2: come out and comment extensively. But I think the point 52 00:02:51,400 --> 00:02:53,200 Speaker 2: we had and we made, we've made today and I 53 00:02:53,240 --> 00:02:56,760 Speaker 2: think we have to make is look quite a lot 54 00:02:56,800 --> 00:02:58,760 Speaker 2: of them. When we do the analysis, quite a lot 55 00:02:58,800 --> 00:03:01,119 Speaker 2: of the market movement of like appears to have been 56 00:03:01,800 --> 00:03:05,680 Speaker 2: us in a sense originated. Now that there's always some 57 00:03:05,720 --> 00:03:07,360 Speaker 2: of that, of course, but it seems to be more 58 00:03:07,400 --> 00:03:12,520 Speaker 2: of it. And yet our analysis would be that inflation 59 00:03:12,639 --> 00:03:15,880 Speaker 2: dynamics here are different the inflation dynamics in the US 60 00:03:16,480 --> 00:03:19,200 Speaker 2: in a very different sort of situation in terms of 61 00:03:19,200 --> 00:03:21,320 Speaker 2: our economies. So there's a tension in there, and I 62 00:03:21,320 --> 00:03:22,919 Speaker 2: think that's the point we have to point out. 63 00:03:23,120 --> 00:03:25,480 Speaker 1: But this is basically because the FED maybe over promised 64 00:03:25,480 --> 00:03:28,240 Speaker 1: the cards in December and then couldn't deliver in terms 65 00:03:28,240 --> 00:03:28,799 Speaker 1: of two percent. 66 00:03:28,919 --> 00:03:31,520 Speaker 2: Well, no, I'm not criticizing the phone in any sense 67 00:03:31,560 --> 00:03:34,160 Speaker 2: or judging the FED. I think the US economy has evolved. 68 00:03:34,200 --> 00:03:36,480 Speaker 2: I mean that's the that's the fact. I mean, that's 69 00:03:36,520 --> 00:03:40,520 Speaker 2: how it's evolved. So I think the way it's evolved 70 00:03:40,560 --> 00:03:44,400 Speaker 2: has been, if anything, to sort of put in a 71 00:03:44,440 --> 00:03:47,680 Speaker 2: slightly starker relief the difference of inflation dynamics. 72 00:03:48,280 --> 00:03:50,480 Speaker 1: Governor, are you worried about the second round effects of 73 00:03:50,480 --> 00:03:52,760 Speaker 1: a cheaper pound, Well, I. 74 00:03:52,680 --> 00:03:56,040 Speaker 2: Mean the exchange rate hasn't moved sharply. Frankly, it's moved 75 00:03:56,080 --> 00:03:58,520 Speaker 2: a bit, and of course you'd expect that because it's 76 00:03:58,520 --> 00:04:01,400 Speaker 2: a relative price. So those points I make about different 77 00:04:01,400 --> 00:04:04,240 Speaker 2: inflation dynamics, so you'd expect somebody hasn't been sharpie. So no, 78 00:04:04,280 --> 00:04:07,120 Speaker 2: I'm not. We watch it very carefully, but it's not 79 00:04:07,200 --> 00:04:09,800 Speaker 2: something that I think. And by the way, as we 80 00:04:09,840 --> 00:04:11,840 Speaker 2: said and as we always do in setting up our 81 00:04:11,880 --> 00:04:15,400 Speaker 2: commentary on the conditioning assumptions, this time, actually the exchange 82 00:04:15,440 --> 00:04:16,960 Speaker 2: Act hasn't moved that much. 83 00:04:17,240 --> 00:04:19,479 Speaker 1: Governor, that there is an assumption looking at history that 84 00:04:19,520 --> 00:04:22,520 Speaker 1: once you continue cutting, now, without pre judging what you'll do, 85 00:04:23,040 --> 00:04:24,560 Speaker 1: can you give us an idea of how you see 86 00:04:24,600 --> 00:04:27,080 Speaker 1: the cycle different to Well. 87 00:04:27,680 --> 00:04:30,000 Speaker 2: One thing I would say about this, which is sort 88 00:04:30,000 --> 00:04:33,080 Speaker 2: of quite interesting, and it's something that we looked at 89 00:04:33,240 --> 00:04:35,240 Speaker 2: during US around. It's quite interesting in the history of 90 00:04:35,240 --> 00:04:39,760 Speaker 2: the NPC that most of the cutting cycles, cycles and 91 00:04:39,800 --> 00:04:44,039 Speaker 2: inverted commas have actually been prompted by some sort of 92 00:04:44,120 --> 00:04:47,480 Speaker 2: shock or other rather than being what I might call 93 00:04:47,520 --> 00:04:50,680 Speaker 2: a natural cyclical sort of we've reached the top and 94 00:04:50,680 --> 00:04:53,040 Speaker 2: now we go down the restrictiveness curve. So we don't 95 00:04:53,040 --> 00:04:54,799 Speaker 2: have a lot of I mean, I would just caution 96 00:04:54,920 --> 00:04:57,320 Speaker 2: there isn't a lot of sort of history, Realtor. 97 00:04:58,000 --> 00:04:59,960 Speaker 1: So what you're telling us is because you're not cut 98 00:05:00,200 --> 00:05:02,600 Speaker 1: in a recession, it could it could actually be one 99 00:05:02,640 --> 00:05:03,040 Speaker 1: and done. 100 00:05:04,960 --> 00:05:10,440 Speaker 2: Well, I think that would be unusual. But I would say, 101 00:05:10,560 --> 00:05:12,960 Speaker 2: you know, I said earlier, nothing's settled that there are 102 00:05:12,960 --> 00:05:15,600 Speaker 2: no fetter companies, nothing's ruled out. 103 00:05:15,520 --> 00:05:17,800 Speaker 1: Governor, what can you tell us about that? The play 104 00:05:17,800 --> 00:05:21,360 Speaker 1: between of course interest rates and QT, right, some may 105 00:05:21,400 --> 00:05:24,640 Speaker 1: find a confusion because they're pulling in different directions. 106 00:05:25,760 --> 00:05:28,360 Speaker 2: So the message we've was given with QT is that 107 00:05:28,880 --> 00:05:32,400 Speaker 2: QT operates in the background for us. We don't think 108 00:05:32,400 --> 00:05:35,520 Speaker 2: it has large impacts in terms of markets. But the 109 00:05:35,560 --> 00:05:38,440 Speaker 2: other point, and this is really the critical point. When 110 00:05:38,440 --> 00:05:41,040 Speaker 2: we sit down to decide on what the right interest 111 00:05:41,120 --> 00:05:48,039 Speaker 2: rate setting is. We take into consideration everything including markets obviously, 112 00:05:48,920 --> 00:05:51,640 Speaker 2: and markets will have absorbed if you like, and taken 113 00:05:51,680 --> 00:05:54,159 Speaker 2: into account the impact of QT. So in other words, 114 00:05:54,240 --> 00:05:56,640 Speaker 2: QT is is always there if you like. If there 115 00:05:56,680 --> 00:05:59,440 Speaker 2: is any effect from QT, we'll capture it because we'll 116 00:05:59,440 --> 00:06:01,440 Speaker 2: capture it and movement of markets, and then we will 117 00:06:01,480 --> 00:06:03,400 Speaker 2: set back crate to reflect that. 118 00:06:03,600 --> 00:06:06,320 Speaker 1: But you don't think it's confusing for markets this kind. 119 00:06:06,160 --> 00:06:09,279 Speaker 2: Of I don't think so. 120 00:06:09,279 --> 00:06:11,080 Speaker 1: So you're not you're not expecting it to end it 121 00:06:11,320 --> 00:06:13,039 Speaker 1: before the end of the year, to make sure that 122 00:06:13,040 --> 00:06:14,679 Speaker 1: there's no confusion in what you're trying. 123 00:06:14,520 --> 00:06:19,200 Speaker 2: To do, to my mind, any difficulty if we get 124 00:06:19,200 --> 00:06:21,680 Speaker 2: to the point when we're going to cut interest rates 125 00:06:21,720 --> 00:06:23,200 Speaker 2: to have QT going on as well.