Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. Governor, thank you so
Speaker 1: much for speaking to Bloomberg. So what exactly is the
Speaker 1: difference between an active hold and a wait and seahold.
Speaker 2: Well, I characterize a wait and seahole. Look, the world
Speaker 2: is very uncertain, unpredictable. I mean not only today. You know,
Speaker 2: if you follow the ol price today, we've had a
Speaker 2: swing in the ore price. I think I'm being arranged
Speaker 2: over ten dollars a barrel today. So the world is
Speaker 2: very unpredictable. So the way I characterize a wait and
Speaker 2: seahold is sitting sort of almost in sort of suspended
Speaker 2: sort of, you know, saying, well, we don't know what's
Speaker 2: going on. You know, let's just sit tight. And we
Speaker 2: haven't done that. We thought very hard about this, so
Speaker 2: it's a very deliberate hold the whole is the right
Speaker 2: thing for the circumstances today, bearing in mind, you know,
Speaker 2: a very wide range of possible outcomes.
Speaker 1: So it means that you're you're holding, but you're kind
Speaker 1: of ready to go. So how likely is it?
Speaker 2: It doesn't mean, it doesn't mean we're sort of poised
Speaker 2: over the sort of the verbial button as it were. No,
Speaker 2: what I mean, is it's it's a fought through hold
Speaker 2: in a sense. Look, there's a range of outcomes. We
Speaker 2: have to sort of not only consider the uncertainty around
Speaker 2: the cause of the shock, if you like, what's going
Speaker 2: on in the Gulf energy prices, but also how the
Speaker 2: uncertainty around how it passes through into the UK economy,
Speaker 2: state of demand in the economy, state of labor market,
Speaker 2: all these things, you get a range of outcomes. We
Speaker 2: will not know the second round effects for a while,
Speaker 2: but we can't wait for the second round effects to
Speaker 2: be staring us in the face because it'll be too
Speaker 2: late by then. But it's a considered policy in that sense.
Speaker 2: It's not a sort of well, this is all too difficult,
Speaker 2: let's just hope for the best.
Speaker 1: So let's say that oil stays at one hundred and
Speaker 1: thirty dollars per veril for a bit of time. Is
Speaker 1: that a game changer?
Speaker 2: Well, the scenario that we have, the worst scenario that
Speaker 2: we've said today, actually has sort of features to it.
Speaker 2: I would say, you're right, it has all going up
Speaker 2: to around about that level. But actually even even more
Speaker 2: powerful is it stays above one hundred dollars a barrel
Speaker 2: until the end of next year, So this is a
Speaker 2: very prolonged shock. That scenario also has stronger pass through
Speaker 2: into general prices in it in the economy, because that's
Speaker 2: another obviously important part of the story. So that's the
Speaker 2: scenario in which you generate, you know, a very difficult situation.
Speaker 1: I mean, I guess the concern is that oil prices
Speaker 1: can fluctuate a lot. Second round checks take a lot
Speaker 1: longer to see. So what are you hoping data wise
Speaker 1: to be able to pinpoint?
Speaker 2: Well before the summer we start, I would say, in
Speaker 2: a situation before any of this happened, when I was
Speaker 2: going around the country, films were saying to me pretty
Speaker 2: consistently they were finding it hard to pass costs through
Speaker 2: into final prices. We've also seen the labor market softening.
Speaker 2: We've seen wage settlements softening gradually over time. That was
Speaker 2: core to our story before any of this came up. Really,
Speaker 2: but that's the context then, so you know it's a
Speaker 2: softer backdrop. So again we have to say, well, okay,
Speaker 2: there's now been a very difficult obviously shot too. Energy
Speaker 2: prices gets fed through, but how much is it going
Speaker 2: to get Fedterugh, that's the question. And what's going to
Speaker 2: happen to consumer demand, which is say, is looking quite soft,
Speaker 2: and that sounds.
Speaker 1: Our consumers and households thinking of twenty twenty two and
Speaker 1: the sharp which is why there's been an inflation expectation
Speaker 1: pick up, maybe quicker than we would have Foune Well.
Speaker 2: Inflation expectations have picked up now because they do tend
Speaker 2: to follow current the shorter end of one year ahead.
Speaker 2: Inflation expectations tend to sort of follow what inflation is today.
Speaker 2: But we're also obviously sensitive to the fact that people's
Speaker 2: memories are important here. They remember the fact that we
Speaker 2: had high inflation here four years ago, so that's also
Speaker 2: has a part to play in this, and we do
Speaker 2: take it into consideration obviously.
Speaker 1: I mean, overall, the markets largely see today as fish.
Speaker 1: Yet your own chief economist was pushing quite hard for
Speaker 1: a hike. So is it odd having a dissenter coming
Speaker 1: from the boy's own office.
Speaker 2: Well, I wouldn't particularly say stuffish, but obviously that judgment
Speaker 2: has to be relative to what you thought, what people
Speaker 2: thought we were going to do. So I respect that
Speaker 2: that that point, and we have been somewhat pushing against
Speaker 2: you know, I was pushing against the curve as you know,
Speaker 2: you know, five or six weeks ago probably now. Look,
Speaker 2: I think Hugh Pill's position is perfectly understandable. You know,
Speaker 2: I didn't vote with him, I didn't agree with him
Speaker 2: on the end decision, but I understand the point he's making.
Speaker 2: I would also say, Hugh write this in his paragraph
Speaker 2: that you use the word modest and I think he
Speaker 2: used the word modestory deliberately. I mean, he'll speak for himself,
Speaker 2: but I think that word is deliberately in there. So
Speaker 2: the differences between us are not that big.
Speaker 1: Would it take What would it take for you to
Speaker 1: actually to vote for a hike next time?
Speaker 2: Well, I think we will. We sit down and go
Speaker 2: through all the evidence, and I think what it will
Speaker 2: take is and we laid out sort of some of
Speaker 2: the things we'd be looking at is quantitive and quality.
Speaker 2: I mean, I think what we get on the quality
Speaker 2: of side is going to be important, because, yeah, we'll
Speaker 2: be talking to a lot of business as saying, how
Speaker 2: are you approaching passing these cost increases through? What are
Speaker 2: you seeing in terms of demand for your whatever you
Speaker 2: produce or provide. We're going to it's going to be
Speaker 2: some time before we get a real read on wage settlements,
Speaker 2: because there's quite a seasonality to wage settlements in this country,
Speaker 2: and we've passed through peak season, which is earlier in
Speaker 2: the spring. So it's going to be a while before
Speaker 2: we get a really probably pretty any big read on
Speaker 2: wage settlements. But we will be looking very carefully at
Speaker 2: what people are planning for, you know, those settlements that
Speaker 2: are coming through. That will be important as well.
Speaker 1: How big is the risk of a technical recession at
Speaker 1: this point, Well.
Speaker 2: Most of the scenarios we have actually and against most
Speaker 2: of the interestrate paths, actually suggest that this is a
Speaker 2: story of slower growth in the more extreme sort of
Speaker 2: difficult scenario with some policy. You can have a variety
Speaker 2: of policy responses. There are some quarters of negative growth.
Speaker 2: But this is actually, interestingly not as we see it
Speaker 2: today at least a story of dominating it's going to
Speaker 2: be a recession. That's not the dominating story at all government.
Speaker 1: I mean, so far, you're happy with the market reaction,
Speaker 1: and also, I mean next week is a big deal
Speaker 1: in terms of you know, the elections in parts of
Speaker 1: the UK. Could that be a market event.
Speaker 2: I think the market's reaction to it so far today
Speaker 2: is so sensible on the UK side. I don't come
Speaker 2: on Tony ekod politics obviously, but what I would say
Speaker 2: is this the things that I think what we've seen
Speaker 2: in the interest right curve has been dominated by the golf.
Speaker 2: The things I look for in terms of when I
Speaker 2: started to sort of break down what's influencing this, it
Speaker 2: has the exchange rate move No, not much at all.
Speaker 2: Actually have we seen much movement in short run sterling
Speaker 2: swap spreads? Not much at all. In fact, there's a
Speaker 2: bit tighter than it was before the budget last autumn,
Speaker 2: So that suggests it's really actually it's a golf story,
Speaker 2: I think government.
Speaker 1: I mean the final question is NISR warned this week
Speaker 1: that rates could go one hundred and fifty basis points
Speaker 1: higher if the Middle East crisis worsened. I mean, can
Speaker 1: you see any scenario where that would happen?
Speaker 2: Well, look, there are really bad scenarios. And if we
Speaker 2: get if we get cut off of energy supplies going
Speaker 2: on for a very long period of time, you know,
Speaker 2: plant things can happen, but it's not it's not in
Speaker 2: our it's not in our central decision today at all.
Speaker 1: But this is what a ten chance. So I don't avoid.
Speaker 2: Because I think that the world is so unpredictable at
Speaker 2: the moment. So we've seen it today, let's alone. You know,
Speaker 2: over longer periods of time, the world is so unpredictable
Speaker 2: that I think putting sort of precise, you know, percentage
Speaker 2: probabilities on things is well put it, put it politely
Speaker 2: hazardous business.
Speaker 1: It's too risky.
Speaker 2: Governor.
Speaker 1: Thank you so much.
Speaker 2: As ever, you're very welcome.