BoE's Bailey says they are currently seeing quite subdued pass through of energy prices, but it remains early. Notes the tightening of financial conditions. Cannot wait for full evidence on 2nd round effects.

Subdued pass-through paired with the caveat that it remains early is the language of second-round risk management: the concern has historically been less the initial energy impulse than its migration into wage settlements and core services, and it is that persistence channel rather than the headline print that has dictated how far and how long policy has had to stay restrictive. The explicit nod to tightening financial conditions matters as a transmission signal, since gilts and sterling have in past episodes done part of the tightening for the committee, a dynamic that has sometimes tempered the need for action and sometimes been treated as evidence to be offset. The line about not waiting for full evidence on second-round effects leans hawkish on the margin, consistent with a pre-emptive bias where policy error on the side of delay has historically been judged costlier. The distinctions worth drawing are between a rates response to the supply shock itself and one to embedded wage dynamics, and whether the governor's tone is echoed by the more dovish wing of the committee, since it is the median that moves. The follow-ons are the next wage and services inflation prints and how peers frame the same shock.