The GBPUSD currency pair was trading up over 45 pips at 13:15 hrs as Bank of England policymakers testified before the UK Parliament’s Treasury Select Committee (TSC). During the testimonies by the central bank’s top policymakers, numerous bullish comments fueled the pound’s gains.
GBPUSD Rallied Higher on the BoE Policymakers’ Testimonies
BoE Governor Andrew Bailey acknowledged that the latest decrease in inflation was positive news and indicated that recent developments in inflation align with the central bank’s expectations. While inflation is expected to end the year slightly lower than previously anticipated, Bailey stressed that this reduction is not substantial.
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Bailey pointed out some weakening in the labour market, particularly on the quantity side, implying potential challenges in terms of employment numbers. Despite some signs of wage growth deceleration, Bailey highlighted that wages remain comfortably above the target consistent with inflation.
The governor reassured MPs that the central bank remains committed to returning inflation to the 2% target. Bailey used the metaphor of a “Table mountain” to describe the rationale behind keeping interest rates unchanged, emphasising stability in the current economic environment.
Andrew Bailey emphasised the prudence of maintaining interest rates at their current levels, indicating that raising rates to combat inflation more aggressively could push inflation below the target.
He expressed concerns about the market’s overreliance on current data releases, suggesting that it may only partially account for potential inflation persistence. He mentioned that QT’s relatively modest impact on yields, estimating it at around 10-15 basis points. He assured that the central bank considers QT effects when setting interest rates.
Other BoE policymakers who testified before the Treasury Select Committee included Jonathan Haskel, who said that the “fall in headline CPI is not a good guide to inflation trend”, and Dave Ramsden, the Deputy Governor for Markets and Banking.
