The Bank of England Ties Itself Up In Knots
Not only were all the official signals wrong, a lot of other expectations have been kicked into the long grass.
Andrew Bailey, governor of the Bank of England.
Photographer: Chris Ratcliffe/Bloomberg“It was a close call” is about the only clear signal sterling markets got on Thursday as the Bank of England explained its decision to leave monetary policy unchanged. It was a spectacular failure of communication from Governor Andrew Bailey: Modern central banking should not allow major global bond markets to fully price in a rate move and then leave them hanging. So much for runaway inflation fears.
The sterling money market swiftly reversed expectations of a rate hike to 0.25% this year, from the current record low 0.1%. The pound fell 1.4% against the dollar and 10-year gilt yield fell 13 basis points. Traders and investors were left scratching their heads as to when interest rates might now rise.