Bailey Speech LIVE: BoE Governor pushes back MPC blame on high inflation

• Andrew Bailey press conference after BoE rate decision could have a big effect on GBP.
• Bank of England triggered 25 bps hike as expected. 
• BoE Governor hints on future monetary policy decisions are meaningful for Pound Sterling. 

Andrew Bailey, Governor of the Bank of England, is speaking in a press conference to explain the BoE decision to raise interest rates by 25 basis points. His remarks carry big weight for the Pound Sterling, once the market has digested the outcome of the rate decision. The Monetary Policy Committee (MPC) voted 7-2 in favor of a rate hike. The MPC policy statement said: "If there were to be evidence of more persistent pressures, then further tightening of monetary policy would be required."

Andrew Bailey press conference

These are the main takeaways from Bailey's Q&A sessions in the BOE press conference:

Path of inflation forecasts is not unreasonable given scale of shocks

"We push back on some arguments that say underlying cause of high inflation is down to past monetary policy."

"There is a level of hindsight in judgements on the BoE's performance."

"Path of inflation forecasts is not unreasonable given scale of shocks."

"There is no bias in our setting of rates looking forward, at this point."

"Transmission mechanism of UK monetary policy via mortgage market has changed so much over time."

"We've got a lot of pass-through to come via mortgage market."

"That is very lively subject of debate on MPC."

We are not giving a directional steer on rates

"On rates, we will be guided by the evidence."

"We are not giving a directional steer on rates."

"MPC's guidance on further action is conditional."

GDP growth is still weak despite upward revision

"News on food inflation is not one of long-run persistence, but how shock to food prices works through system."

"Reasons I hear on high food inflation include energy costs, hedging of commodity prices."

"GDP growth is still weak despite upward revision."

"Past rate hikes will weigh more economy in coming quarters."

Will adjust bank rate as necessary to return inflation to target sustainably

"Want to emphasize that having large upside risk on inflation does not call into meeting inflation target."

"Upside risks may not materialize."

"The Increase in UK bank funding costs after overseas bank failures was short-lived."

"Changes are still working the way through the economy, MPC factors this into policy decisions."

"MPC will adjust bank rate as necessary to return inflation to target sustainably."

Good reasons to think CPI will fall sharply from April

"Outlook for growth, unemployment has improved."

"Inflation remains too high, we have to stay the course."

"There is greater resilience in the economy than we had expected."

"Acutely aware of how difficult rise in food prices is for people."

"We do see signs that food price inflation will start to slow."

"Good reasons to think CPI will fall sharply from April."

"Inflation is on course to halve by the end of this year but our focus is on returning inflation to 2%."

"As inflation falls, second round effects unlikely to go away as quickly as they appeared."

"News on indicators of inflation persistence has been mixed."

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On his press conference, Andrew Bailey's vocabulary will be highly scrutinized when discussing inflation pressures, still way too high as the UK Consumer Price Index (CPI) came above 10% annually in the last release. Bailey's words could shift market expectations for future monetary policy decisions, thus impacting the Pound Sterling valuation.  

According to Matías Salord, Senior Analyst at FXStreet, high expectations from the market might mean that a surprise on the dovish side could be on the cards: “The expected hawkish tone should strengthen the currency. However, some of this is already factored into the market, so if the Bank of England (BoE) adopts a more dovish stance, the Pound could face downward pressure.”

GBP/USD is trading right above 1.2600 at 11:20 GMT, after the BoE Interest Rate Decision and just before the Bank of England press conference starts.

About Andrew Bailey

Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting.