Playback speed
Share post
Share post at current time

BOE Open to August Rate Cut, Sticky Services Prices May be Key: Davies

Redburn Atlantic Chief Economist Sees BOE "Playing with Fire" on QT

Melissa Davies is partner and chief economist at Redburn Atlantic. She has 15 years of City experience doing research on macroeconomic policy, central banks an their interactions with the financial system, alternative economic theories, economic history, and long-term growth drivers like technology and demographics.

We looked at two big issues as the Bank of England met and held its key rate steady as it left the policy door open to a rate cut later this year. Melissa says if the do move, it will most likely be at the August meeting when they issue new forecasts for the U.K. economy and inflation. But she only gives a little bit more than 50% odds because she is not convinced that U.K inflation, which has come down from its recent peak, will be prevented by sticky services from falling as low as the BOE needs to see it.

Melissa also discussed her recent piece on the BOE’s quantitative tightening path which she titled “Is the Bank of England Playing with Fire?” She argues that increased take up of the BOE’s Short Term Repo “is a clear signal to us that QT needs to stop” because fine-tuning balance sheet reduction risks a non-linear shock to repo market and possible spillover to the wider financial system which would entail renewed asset purchases as the only possible backstop.”

Now hear, see what she has to say.

Leave a comment


Kathleen Hays Presents: Central Bank Central
Kathleen Hays Presents: Central Bank Central Podcast
Timely, in depth analysis of Federal Reserve policy and players, and of its central bank counterparts around the world that are driving global markets.