BoE’s Tenreyro: BoE might need to cut rates sooner than thought

Bank of England (BoE) interest rate-setter Silvana Tenreyro said on Tuesday, “I expect that the high current level of bank rate will require an earlier and faster reversal, to avoid a significant inflation undershoot.”

Additional quotes

“With bank rate moving further into restrictive territory, I think a looser stance is needed to meet the inflation target.”

“Looser stance can be achieved either through lower bank rate today or through lower bank rate in future.”

“In the absence of further counterbalancing cost-push shocks, I judge inflation is likely to fall well below target.”

“Cannot be complacent about the ability of QE to substitute for an interest-rate policy if, when inflation falls, we find ourselves still in a world of low equilibrium interest rates

“High-frequency private-sector regular pay growth has fallen back sharply in recent months.”

“Terms of trade shock to the UK has unwound faster than I expected.”

“I expect lower price inertia from second-round effects via wage growth, given a lower rate of headline inflation.”

“We will see less of a drag on demand and the output gap from further falls in real income.”

Market reaction

Despite the dovish remarks from the BoE policymaker, GBP/USD is holding its latest uptick near 1.2500, adding 0.73% on the day.