Speaker 1: Bloomberg Audio Studios, podcasts, radio News. You were surprisingly close
Speaker 1: to a Holt. Can you explain that?
Speaker 2: Well, I wouldn't say Holt, I would say I was
Speaker 2: much more balanced. Well, I was balanced going into it
Speaker 2: from at the end of the last meeting, thinking well,
Speaker 2: I'm really open minded for the next round and we'll
Speaker 2: see what happens. So I think, you know, my mind
Speaker 2: was certainly open at that point as to where we
Speaker 2: would go next.
Speaker 1: But the decision could have gone to a hold this time.
Speaker 1: So how should markets interpret that?
Speaker 2: Well, I think market shinterpted is we're in a situation
Speaker 2: where there are risks on both sides of this situation.
Speaker 2: There are a risk that demand could be considerably weaker
Speaker 2: than we expect it to be. That could pull down
Speaker 2: on inflation. We would then need to put lower interest
Speaker 2: rates than we're predicting. There's the risk on the other
Speaker 2: side that this process of adjustment was removal of the
Speaker 2: sort of persistence of the fects from the inflation we
Speaker 2: had for years ago isn't going to materialize in the
Speaker 2: way we think it is, And also that the supply
Speaker 2: capacity of the economy remains more limited. We don't get
Speaker 2: the sort of supply growth that even that we're thinking
Speaker 2: we're going to get and that will cause inflation to
Speaker 2: be higher. Now, I we did it in two parts.
Speaker 2: We started with the sort of domestic situation and then
Speaker 2: sort of in the sense, brought the tariff and trade
Speaker 2: news into it. On the domestic situation, this is sort
Speaker 2: of crucial to your question about sort of you know,
Speaker 2: how near or how far were you from action. An
Speaker 2: important part of the story is actually where particularly where
Speaker 2: the pay story is going in this country. Is it
Speaker 2: going to you know, it's it's higher clearly than consistent
Speaker 2: at the target. Is it going to come down during
Speaker 2: the course of this year? Are we starting to see
Speaker 2: the sort of the signals And my conclusion sort of
Speaker 2: pouring over the evidence and the last few weeks as
Speaker 2: we went into this decision, is I can see enough
Speaker 2: in there. Yeah, that I think we are begining to
Speaker 2: see in the sort of higher frequency data that we
Speaker 2: are seeing some scientific coming off, even though in the
Speaker 2: official slower frequency data, actually you don't really see so
Speaker 2: much of that at the.
Speaker 1: Moment, Governor, I mean, Murgis are now almost ruling out
Speaker 1: to move in June. Is that the right interpretation?
Speaker 2: I suppose The only thing we can say in confidences
Speaker 2: in the world we're in at the moment is that
Speaker 2: a lot's going to happen in the next whatever it
Speaker 2: is six weeks or so. I mean, it really is
Speaker 2: going to happen. I mean a lot really is going
Speaker 2: to happen. I suspect, So I have to be honest
Speaker 2: with you again. You know, I'm very open minded about
Speaker 2: every meeting is by the way, every meetings live for us.
Speaker 2: That's our philosophy. It's it's not a shifting philosophy, that's
Speaker 2: a permanent philosophy. So I'm very open minded about it,
Speaker 2: frankly because I think we'll know a lot. We'll know
Speaker 2: a lot both domestically and internationally. Well, there are a
Speaker 2: lot more about pay actually, because there's a peak of
Speaker 2: pay settlements that we will know more about because we're
Speaker 2: sort of just going through that, and I think we
Speaker 2: can probably guarantee we're going to know more internationally. Stuff
Speaker 2: will happen.
Speaker 1: How much uncertainty does the UK US trade deal actually
Speaker 1: take off the table?
Speaker 2: Well, I think it's obviously good news now. However, the
Speaker 2: UK is the very open economy, so when we formed
Speaker 2: our view, it's not just about the UK US bilateral
Speaker 2: trade relationship. It's about how all the other relationships with
Speaker 2: the world come back to the UK as it were
Speaker 2: in terms of the openness of the UK. So I
Speaker 2: really hope, because I do think this is very good
Speaker 2: news on the UK US front. I hope it's the
Speaker 2: first of many, because that's really what we need to see.
Speaker 1: It is a trade deal with the EU. The bigger prize.
Speaker 2: Well, it's important. I think China's very important as well, frankly,
Speaker 2: but those are important.
Speaker 1: Ones, Yes, which ones are more important US, China or UK?
Speaker 1: You for the UN, I don't.
Speaker 2: Actually have a rank, order to be honest with you.
Speaker 2: I think it's it's because of the sort of the
Speaker 2: sort of other fluctuation nature of the situation. We do
Speaker 2: not have a sort of you know, a league table
Speaker 2: of importance in that sense.
Speaker 1: How big would the growth downgrade had been if not
Speaker 1: for the looser financial conditions?
Speaker 2: Well, yeah, okay, it's a slightly hypopoctical question obviously, because
Speaker 2: they did move. Obviously, our sort of taking a part
Speaker 2: of the of the components would have suggested that the
Speaker 2: impact of the world on growth next year and actually
Speaker 2: is not a bad place to lock Actually would have
Speaker 2: been about point three. I think something like that without
Speaker 2: then and of offsetting effects of financial markets, and so.
Speaker 1: Again going forward, given all the uncertainty, do you you know,
Speaker 1: what does it mean for cuts? How should market interpret
Speaker 1: what we're seeing in you know, longer term?
Speaker 2: So I think the path is still gradually and carefully downwards.
Speaker 2: I don't think that that path is done. A lot
Speaker 2: will depend also, of course, on the say, on these
Speaker 2: important domestic developments. But I'm not going to make predictions
Speaker 2: about you know, how quickly how much, because there is say,
Speaker 2: there is so much now in a sense that we're
Speaker 2: going to learn in the next in the coming in
Speaker 2: the coming time. But I do think the underlying path
Speaker 2: is down as we are going to get a bit
Speaker 2: of a bit of a bump up in inflation. I'm
Speaker 2: afraid we know that it's going to be in the
Speaker 2: next release because it's it's in these sort of so
Speaker 2: called administered prices, which we already know. But our view
Speaker 2: is it's not it's nothing like what we what we
Speaker 2: saw a few years ago. And we do think in
Speaker 2: the current situation, you know, it's reasonable to look through
Speaker 2: that does.
Speaker 1: A terminal rate at three and a half percent sound reasonable.
Speaker 2: Well, again, I think judgments on the terminal rate and
Speaker 2: conditions of uncertainty like this are frankly, you know, quite
Speaker 2: quite heroic at times. Obviously the market makes those judgments.
Speaker 2: Market has to make those judgments. Uh, you've seen the
Speaker 2: profile that we've published today with inflation based on that
Speaker 2: market profile, and it doesn't look an unreasonable one.
Speaker 1: Going forward to how concerned are you about the surgeon pound?
Speaker 1: Does that have any impact on.
Speaker 2: How much the word surging is is quite dramatic because
Speaker 2: Stirling has been a little bit sort of in the middle. Actually,
Speaker 2: so you've had obviously we've obviously we've appreciated against the dollar,
Speaker 2: but we've depreciated against some other currencies, so we've relative
Speaker 2: to some others, we've been somewhat in the middle. Actually again, yeah,
Speaker 2: we factor it into our our forecast. I think we
Speaker 2: also have to look at it quite carefully as to
Speaker 2: why is it searching? Because I'm not sure that just
Speaker 2: apploying the usual theory of interest parity you know, tells
Speaker 2: you all the story. In fact, it doesn't touch it
Speaker 2: because our staff do a lot of work to sort
Speaker 2: of pick the bones apart, and they'll tell you actually
Speaker 2: that's not really, that's not really the story. So I
Speaker 2: think it's more going on than just that story. So
Speaker 2: again we have to look at you, what degree I
Speaker 2: sort of risk Premiu coming into the into the market
Speaker 2: in that sense,