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Speaker 1: Well, the message we're giving is that we have Our

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Speaker 1: job is to get inflation down to the two percent target. Now,

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Speaker 1: we've made a lot of progress this year, and I

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Speaker 1: believe we'll make more progress in the rest of this year,

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Speaker 1: but we've still got a long way to go. So

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Speaker 1: you know, very clear messages. We think the policy is

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Speaker 1: having a restrictive effect at the moment. I'm afraid we're

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Speaker 1: going to have to maintain this stance for what we

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Speaker 1: describe as an extended period of time is what is.

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Speaker 2: An extended period of time? Is that a year, six months?

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Speaker 2: How do you do make that language?

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Speaker 1: What I described we described in the report is really

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Speaker 1: to We talked two approaches. One is to take the

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Speaker 1: market curve as it was, you know, a week or

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Speaker 1: so ago, and that delivers inflation coming back to target

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Speaker 1: broadening on the sort of two year horizon. We also

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Speaker 1: taught the took a constant rate path. Just maintaining it

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Speaker 1: throughout the next three years at at the current rate

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Speaker 1: brings it back a little bit quicker, but there's not

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Speaker 1: much between them. So the key point here is, yeah,

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Speaker 1: we're going to have to maintain their stance to be

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Speaker 1: absolutely assured that inflation is coming back to two percent.

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Speaker 2: The point in there is though, that the market forecast,

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Speaker 2: which does have cuts priced into it, or be it

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Speaker 2: it was a week ago and there was only one

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Speaker 2: of them, it does have a cut price in and

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Speaker 2: that gets you to a situation where you've got inflation

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Speaker 2: basically back down to targets within two years. It significantly

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Speaker 2: reduces the risk of a recession. Isn't that therefore the

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Speaker 2: most probable outcome when it comes to the interestrate path,

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Speaker 2: I at least pricing in one cut during that horizon.

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Speaker 1: Actually, neither of those two paths had a recession in them.

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Speaker 1: What they both have is very subdued growth because at

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Speaker 1: the point when we did.

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Speaker 2: The reduced risk of a recession, well.

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Speaker 1: I mean they are slightly reduced. There was only about

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Speaker 1: twenty five basis points difference between the two piles if

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Speaker 1: you average it out over three years. So there's not

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Speaker 1: much between these paths. And that supports the story that

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Speaker 1: we're saying, which is, look, we're going to have to

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Speaker 1: maintain the stance extended period.

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Speaker 2: To ensure today that you've needed to reiterate that so strongly.

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Speaker 2: The language is a little bit more hawkish.

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Speaker 1: Well, I think for two reasons. One is because we

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Speaker 1: still see the risks to inflation as being on the

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Speaker 1: upside at the moment, and it's important not to that

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Speaker 1: message not to get lost. And there are several reasons

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Speaker 1: why we think the risks are on the upside, but

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Speaker 1: they are still on the upside. Secondly, if you don't

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Speaker 1: mind be saying safe, because everybody started to ask the

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Speaker 1: question about cuts, So in a way I think I

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Speaker 1: have to and we have to sort of lean against

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Speaker 1: that and say no, you know, we've got to maintain

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Speaker 1: restrictive policies.

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Speaker 2: Let's come back to that. Everybody started to talk about cuts,

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Speaker 2: the markets price, it started to price cuts. You're saying

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Speaker 2: you do need to therefore lean in on that.

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Speaker 1: Well, I'm not leaning against the curve that we use

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Speaker 1: the other when we did at the forecast, because ferrently

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Speaker 1: there was there wasn't a lot of difference between those

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Speaker 1: two views, so the constant throughout and the market then.

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Speaker 2: But any more than that, would you want to lean

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Speaker 2: in on.

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Speaker 1: That if the market has taken from what we have

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Speaker 1: published a day a view that we are leaning towards

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Speaker 1: more cuts, and I'm afraid I will lean against that.

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Speaker 2: Yes, in terms of the other message that you may

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Speaker 2: be giving today, and that may be a broader message.

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Speaker 2: Inflation expectations have probably become more de anchored here than

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Speaker 2: maybe elsewhere. Is there therefore a reason a need to

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Speaker 2: reiterate that restricted policy will be with us for longer

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Speaker 2: in order to make sure that you do that policy

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Speaker 2: does reanchor policy back to where you would like it

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Speaker 2: to be. Do you need to make that message crystal

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Speaker 2: clear at this point?

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Speaker 1: I don't think that inflation expectations have become more de

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Speaker 1: anchored here. Actually, I think we've all most central banks

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Speaker 1: have had pretty similar experiences, and I think we're all

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Speaker 1: having to give a variance of these messages because frankly, yes,

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Speaker 1: we've got to see inflation come down, and there is

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Speaker 1: you know, you're right in highlighting that there's an important

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Speaker 1: link obviously between today's inflation, the expectations that people form,

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Speaker 1: and therefore what inflation is going to be in the future.

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Speaker 1: So it's an important is the pain worth the gain?

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Speaker 2: Is that another but you need to reiterate that side

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Speaker 2: of things as well, that yes, we're going to have

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Speaker 2: restricted policy, we are going to reanchor policy, but it's

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Speaker 2: going to be worth it.

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Speaker 1: Well, I do. I do strongly believe that, because I

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Speaker 1: do say often and it's important to say that. Of course,

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Speaker 1: if we continue in a situation where inflation is above target,

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Speaker 1: then that's going to be a worse outcome.

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Speaker 2: Do you think we are heading for an environment where

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Speaker 2: rates are higher for longer. Let's talk a little about

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Speaker 2: the curve. I know you don't want to leave the curve,

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Speaker 2: but let's talk about the curve. The curve over the

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Speaker 2: certainly since the last meeting has steepened significantly at the

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Speaker 2: long end, we've got a bear steepening long er rate

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Speaker 2: to come up curves flat as a pancake. Why do

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Speaker 2: you think that is? Firstly, Japal's talked about term premium,

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Speaker 2: there's deficit pricing going in there. You talked in the

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Speaker 2: introduction about maybe a higher our star neutral rate. It

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Speaker 2: could be stickier inflation. Firstly, why do you think that

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Speaker 2: has happened? What message is the long end of the

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Speaker 2: curve sending.

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Speaker 1: I think I think there's one or two things that

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Speaker 1: we're picking up from there. I do think that the

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Speaker 1: higher for longer message has been absorbed over this period

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Speaker 1: that you're describing. So you go back to the summer.

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Speaker 1: I think it's a fair fair point to sort of start.

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Speaker 1: I do think that the market has absorbed this from

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Speaker 1: from central backs in the plural has absorbed this message

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Speaker 1: and it's got reflectively in curves. I think there's a

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Speaker 1: term premium element as well, as you rightly say what

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Speaker 1: I would say there is that there is there is

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Speaker 1: a very large one we call sort of global element

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Speaker 1: to that. And interestingly, I think if you look at

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Speaker 1: the UK and the Euro Area together in terms of

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Speaker 1: curve movements, pretty similar sorts of numbers, US though quite

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Speaker 1: a lot bigger.

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Speaker 2: Ye it is, so there is a bit of term

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Speaker 2: premium in it. Is there a danger that the US

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Speaker 2: curve stems up, stays elevated, and we end up importing

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Speaker 2: tighter monetary conditions, tighter financial conditions as a result of that,

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Speaker 2: when actually the economy may not need that. There's a

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Speaker 2: sort of gravitational effect between treasuries, guilts, bunts, and we

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Speaker 2: may end up because of that story being too tight here.

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Speaker 1: Well, we always of course have to factor that into

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Speaker 1: our policy setting, and we have to factor that into

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Speaker 1: our forecast, and we will do that obviously. That's why

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Speaker 1: we we importantly condition on a market curve because it

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Speaker 1: gives us an ability to do just that. So if

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Speaker 1: we get more of that, I mean, we will obviously,

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Speaker 1: you know, obviously do that, and you know we're just

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Speaker 1: our sort of you know, just our judgment accordingly.

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Speaker 2: Final question, would there be a way of leaning in

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Speaker 2: on that? Could you adjust twist QT for instance, to

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Speaker 2: kind of alter the shape of the curve maybe to

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Speaker 2: deal with that imported financial condition.

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Speaker 1: We've taken quite a strong position that we're not running

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Speaker 1: QT to move the curve around, that we're running it

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Speaker 1: in what I call a neutral fashion in that sense,

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Speaker 1: and it would it would finally take a lot to

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Speaker 1: move me from that position, I think on the whole,

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Speaker 1: I think that's you know, my mother used to say

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Speaker 1: it'd be a bit clever, too clever by half, So

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Speaker 1: I don't know if I was just doing that now.

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Speaker 2: The girl on the Bank of England Andrew Bailey, speaking

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Speaker 2: to me a little earlier today after the Bank's rate decision.

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Speaker 1: This is blue Book