Bailey calls for 'unwavering commitment' to inflation target, gilt sell-off could

Bank of England governor Bailey offered few clues to markets on Thursday, as while he called for an unwavering committent to returning inflation to target, he did not provide any guidance on the possibility of a November hike.

Fellow MPC members Greene and Pill both struck a hawkish note during their remarks yesterday, warning over risks to inflation, though both of these members already voted for a hike at the last meeting so we would argue that their communications carry less weight for now.

We still have almost a month to go until policymakers convene in November, so we would expect the doves to await upcoming reports on employment and the September inflation figures, in particular, before hinting at their intentions to change tact.

The committee will also have the small matter of the Autumn Budget between now and then to digest. It seems unlikely that the budget will derail our call for a November rate increase, though any dropping of the ball that triggers another leg higher in gilt yields could dampen bets for further tightening beyond next month’s meeting.