22 May 2023 - Inflation to fall quicker than wages
Bank of England Governor, Andrew Bailey, attended a conference in the U.S. in which the amount of advance guidance that is given to the markets of Central Bank monetary policy intentions was discussed. Over several years, and even up until very recently. There was little market interest in what the Bank was doing since inflation was low for several years, so interest rates were allowed to fall, then over the past eighteen months, as prices of energy and foodstuffs have skyrocketed, tightening of policy has been both necessary and obvious. At the margin of policy changes, as the Bank is either beginning or ending policy changes, is when the advance guidance to the market needs to be considered. During the cycle of rate increases, only the increments are of interest to analysts and investors, since as inflation continues to rise, a hike becomes a foregone conclusion. The G7 nations which met in Japan last week, are all arriving at an inflection point in policy changes where the markets are expecting them to call a halt to further increases. Beyond Currency Market Commentary: Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.