The HSBC global head of foreign exchange strategy told CNBC on Friday that the Bank of England (BOE) representatives that are pushing for an interest rate scramble have been wrong for the past eight years and there is no mark of them getting right now.
The meeting of BOE monetary policy committee which takes place in the month of June has the result of the 5-3 vote in the favor of holding interest rates at record low levels. The officials who were supporting the majority was Governor Mark Carney and Chief Economist Andy Haldane.
Haldane broke ranks to put himself at odds with the BOE Governor just after a week later and just after the 24 hours after Carney argued the state of the economy and ongoing Brexit uncertainty meant scrounging costs should remain unbothered. The chief economist of the Britain’s central bank has said on Wednesday that he would soon be in a position to support a rate rise.
David Bloom, who is the global head of foreign exchange strategy at HSBC, told CNBC, “You get the boss speaking one day and then his chief economist the next and saying different things, it feels to the market that the chief economist Haldane is heading towards a rate rise. I don’t know why, I don’t know what they think is happening. I’m most quite sure what this is all about.”
“They have been wrong for eight years about this and now they are going to be right? No, no, falling sterling creates inflation, inflation squeezes real incomes, consumption comes down, import come down and the current account rectifies itself. It’s amazing financial markets can work,” he added.
Since 2011, the BOE’s monetary policy committee is most divided at its interest rates and the most dovish member is Haldane. Now he said that it would be practical to stiffen policy before the end of 2017. Shortly after the Haldane’s comment the other officer, Sterling rose on Wednesday as the investors were forced to reexamine the long-held view that interest rates would remain unmoved until well in 2018.
The BOE rate-setter Kristin Forbes said on Thursday that the UK’s central bank could no longer explain keeping interest rates at 0.25 percent.
When she was speaking at London Business School she said: “Many of the factors that have justified keeping interest rates at emergency levels over the past few years have become less potent, and sterling’s depreciation has fundamentally shifted, underlying inflation dynamics in a way that makes it more pressing to begin this voyage soon.”