BoE's Breeden (neutral) says firms and workers are likely to have less price and wage bargaining power, so second round effects less likely
- Where we are now is very different to last energy shock in 2022
- Not wise to act before we have sufficient information
- Will know more on balance of risks and scale and duration of shock by April meeting
- Even with higher borrowing costs, Breeden does not expect a bust in borrowing as no boom before
- Says measures BoE put in place after mini-budget are doing their job
- Concerned that any reduction to bank capital would not go into increased lending, but instead to shareholders
- Says gilt market functioning well amid Iran war volatility
Context
The BoE's Breeden presents a notably neutral stance, indicating a shift in bargaining power away from both firms and workers, which suggests reduced inflationary pressures from wage increases. His cautious approach underscores a growing consensus to wait for more data on economic shocks before making policy moves, reinforcing that current measures are stabilizing the situation. This could imply a stabilizing outlook for GBP and fixed income markets as uncertainties linger.
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