BOE Governor Carney’s IMF speech more dovish - UOB Group

Analysts at UOB Group noted that the Bank of England (BOE) Governor Mark Carney gave a lecture in IMF HQ in Washington DC on Monday (18 Sep).

Key Quotes:

"Who said while the UK decision to leave the European Union has slowed growth, it has also cut the UK economy’s potential, and that reduced “speed limit” (growth potential) increases the chance of overheating and partly explains why the BOE’s Monetary Policy Committee now says it may need to raise rates soon."

"Carney’s comments also added weight to the idea that above-target inflation is, in fact, becoming more entrenched and cannot be ignored, rather than being a short-term spike as a result of the decline in the pound."

"Carney also said there are global factors that could justify U.K. policy tightening soon. In his view, the case for such a move is reinforced by the possibility that global equilibrium interest rates may be rising, which according to him, means that UK monetary policy “has to move in order to stand still.”"

"However, BOE Governor Carney’s speech in IMF HQ was interpreted as more dovish compared to last week’s MPC statement, with him reinforcing the view that the rate-hike cycle in the UK will be very shallow or in Carney’s words “limited and gradual”."