“The economy is performing a little better than expected, albeit it is slow relative to the rate it had prior to the referendum,” Carney said. “We have to take into account inflation considerations, so we’ll take that into account.”
When talking about their next rate setting meeting. Having watched these statements for decades now, this is a very clear signal that the BOE is looking for a way to climb down from it's stance of dropping rates even more and also printing more money. It has already had an impact, the £ is climbing against the € again. There is no way the EU is going for higher rates with France and Italy heading back into recession.
To put the France and Italy situation into perspective, they are, together, $4.5trillion of GDP. Germany is $3.4 trillion. The EU, without the UK, is $13 trillion.
I'm sure after comments by the BOE and the government about turbulence ahead and hard Brexit, the markets were beginning to price in a drop in rates to 0.1%. Now they've been hit by the clue stick and are beginning to price in a short term hold and a mid term raise, due to inflation and overheating economy.
The more the BOE backtracks the more of a clue the markets will get. This is just the beginning of "we got it wrong". As the economy continues to perform and inflation rises and wages also rise, the "we got it wrong" will be stronger.
After all, a 30% appreciation in the value of the £ is worth 2% on the interest rate in fighting inflation and doesn't hurt the low man on the totem pole. The only way we'll see that is if the BOE capitulates and says it's more likely to raise than lower rates.
