Speaker 1: Bloomberg Audio Studios, podcasts, radio news you haven't heard. Thank
Speaker 1: you so much for speaking to Bloomberg. Now. You've been
Speaker 1: quite direct and suggesting that the BOE may cut rates
Speaker 1: more sharply though the markets are expecting. Is that because
Speaker 1: you're worried that markets won't be prepared for what's to come. No.
Speaker 2: I think our forecasts are conditional on a number of things.
Speaker 2: But one of the things that obviously our condition on
Speaker 2: is we use the market curve to set them up.
Speaker 2: So I think it's important that we know if we
Speaker 2: find the forecast with the market curve produces the best judgment,
Speaker 2: which has inflation below targets or above target, but not
Speaker 2: to target at the at the sort of horizon we say,
Speaker 2: so we say this is where we got to best
Speaker 2: collective judgment. Is that now it follows I think that
Speaker 2: this is a comment I made earlier that what we're
Speaker 2: saying is if and if it is of course critical
Speaker 2: here if the world evolves as you know that that
Speaker 2: forecast suggests it was, well, probably the case would be
Speaker 2: there for a less restrictive path of policy is conditional.
Speaker 1: Everything is conditional. Is June and live meeting, all meetings alive,
Speaker 1: So is June likely that's a different question.
Speaker 2: I think the key points I would make is that
Speaker 2: we have changed our view on the likely persistence of
Speaker 2: inflation on the second round effects, and it's good news.
Speaker 2: We think that we think there's there's evidence there to
Speaker 2: suggests they will be less pronounced than we thought they
Speaker 2: would be. But that's a judgment. And for me, I'm
Speaker 2: now looking at particularly streaking indicators services, inflation, pay, and
Speaker 2: the quantity side of the labor market to really judge
Speaker 2: this persistence question, how it will.
Speaker 1: Evolve the governor. Because you were up quite upfront about
Speaker 1: market expectations, does that come from Ben Bernanke's review that
Speaker 1: you will talk more about the more is to indicate
Speaker 1: more to the markets. Also, what you're doing next, Well,
Speaker 1: we're not.
Speaker 2: Going to We're not going to implement the monanky review piecemeal,
Speaker 2: so we was going to spend a few months really
Speaker 2: sort of thinking quite hard about what we do. And
Speaker 2: he raised the conditioning assumptions as a point. Actually, and
Speaker 2: this question which I think all central banks wrestle with
Speaker 2: in various ways, which is how do you actually sort
Speaker 2: of represent a future profile of rates to set up
Speaker 2: your judgment without sort of getting yourself into position where
Speaker 2: you absolutely nailed on, as it were, for a view
Speaker 2: of rates two years out, which of course is just
Speaker 2: not realistic to commit to.
Speaker 1: But can we expect more market commentary from you going.
Speaker 2: Forward, Well, we had a particular I think we're in
Speaker 2: a particular situation at the moment. I've said before it's
Speaker 2: a high bar I think for us to sort of
Speaker 2: come out and comment extensively. But I think the point
Speaker 2: we had and we made, we've made today and I
Speaker 2: think we have to make is look quite a lot
Speaker 2: of them. When we do the analysis, quite a lot
Speaker 2: of the market movement of like appears to have been
Speaker 2: us in a sense originated. Now that there's always some
Speaker 2: of that, of course, but it seems to be more
Speaker 2: of it. And yet our analysis would be that inflation
Speaker 2: dynamics here are different the inflation dynamics in the US
Speaker 2: in a very different sort of situation in terms of
Speaker 2: our economies. So there's a tension in there, and I
Speaker 2: think that's the point we have to point out.
Speaker 1: But this is basically because the FED maybe over promised
Speaker 1: the cards in December and then couldn't deliver in terms
Speaker 1: of two percent.
Speaker 2: Well, no, I'm not criticizing the phone in any sense
Speaker 2: or judging the FED. I think the US economy has evolved.
Speaker 2: I mean that's the that's the fact. I mean, that's
Speaker 2: how it's evolved. So I think the way it's evolved
Speaker 2: has been, if anything, to sort of put in a
Speaker 2: slightly starker relief the difference of inflation dynamics.
Speaker 1: Governor, are you worried about the second round effects of
Speaker 1: a cheaper pound, Well, I.
Speaker 2: Mean the exchange rate hasn't moved sharply. Frankly, it's moved
Speaker 2: a bit, and of course you'd expect that because it's
Speaker 2: a relative price. So those points I make about different
Speaker 2: inflation dynamics, so you'd expect somebody hasn't been sharpie. So no,
Speaker 2: I'm not. We watch it very carefully, but it's not
Speaker 2: something that I think. And by the way, as we
Speaker 2: said and as we always do in setting up our
Speaker 2: commentary on the conditioning assumptions, this time, actually the exchange
Speaker 2: Act hasn't moved that much.
Speaker 1: Governor, that there is an assumption looking at history that
Speaker 1: once you continue cutting, now, without pre judging what you'll do,
Speaker 1: can you give us an idea of how you see
Speaker 1: the cycle different to Well.
Speaker 2: One thing I would say about this, which is sort
Speaker 2: of quite interesting, and it's something that we looked at
Speaker 2: during US around. It's quite interesting in the history of
Speaker 2: the NPC that most of the cutting cycles, cycles and
Speaker 2: inverted commas have actually been prompted by some sort of
Speaker 2: shock or other rather than being what I might call
Speaker 2: a natural cyclical sort of we've reached the top and
Speaker 2: now we go down the restrictiveness curve. So we don't
Speaker 2: have a lot of I mean, I would just caution
Speaker 2: there isn't a lot of sort of history, Realtor.
Speaker 1: So what you're telling us is because you're not cut
Speaker 1: in a recession, it could it could actually be one
Speaker 1: and done.
Speaker 2: Well, I think that would be unusual. But I would say,
Speaker 2: you know, I said earlier, nothing's settled that there are
Speaker 2: no fetter companies, nothing's ruled out.
Speaker 1: Governor, what can you tell us about that? The play
Speaker 1: between of course interest rates and QT, right, some may
Speaker 1: find a confusion because they're pulling in different directions.
Speaker 2: So the message we've was given with QT is that
Speaker 2: QT operates in the background for us. We don't think
Speaker 2: it has large impacts in terms of markets. But the
Speaker 2: other point, and this is really the critical point. When
Speaker 2: we sit down to decide on what the right interest
Speaker 2: rate setting is. We take into consideration everything including markets obviously,
Speaker 2: and markets will have absorbed if you like, and taken
Speaker 2: into account the impact of QT. So in other words,
Speaker 2: QT is is always there if you like. If there
Speaker 2: is any effect from QT, we'll capture it because we'll
Speaker 2: capture it and movement of markets, and then we will
Speaker 2: set back crate to reflect that.
Speaker 1: But you don't think it's confusing for markets this kind.
Speaker 2: Of I don't think so.
Speaker 1: So you're not you're not expecting it to end it
Speaker 1: before the end of the year, to make sure that
Speaker 1: there's no confusion in what you're trying.
Speaker 2: To do, to my mind, any difficulty if we get
Speaker 2: to the point when we're going to cut interest rates
Speaker 2: to have QT going on as well.