BOE’s Saunders: Pace of further UK rate increases likely to be "gradual", not "glacial"
|The Bank of England (BOE) Monetary Policy Committee (MPC) member Michael Saunders is on the wires now, via Reuters, making his scheduled speech at the University of Strathclyde's Fraser of Allander Institute, in Glasgow.
Key Headlines:
The UK no longer needs as much stimulus as before, due to little slack and rising cost pressures.
Pace of further UK rate increases likely to be "gradual", not "glacial".
"Gradual" does not imply BOE cannot raise rates more than once a year or faster than market expects.
"Quite a wide range" of tightening paths would count as gradual vs past average of 100 bps over 8 months.
UK interest rates "probably need to move over time to something more like neutral”.
Neutral interest rate in UK is not static, likely to be around 2% over next few years.
Do not need to return to neutral rates too quickly.
Expects labor market inflation pressures to be a bit greater than BOE forecast in February.
Significance of data pointing to soft q1 growth is "questionable" due to weather, history of upward revisions.
Annual growth over next year or two will remain at 1.5-2.0%, marginally above potential.
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