Bloomberg Audio Studios, Podcasts, radio news. Governor, thank you so much for speaking to Bloomberg. So what exactly is the difference between an active hold and a wait and seahold.
Well, I characterize a wait and seahole. Look, the world is very uncertain, unpredictable. I mean not only today. You know, if you follow the ol price today, we've had a swing in the ore price. I think I'm being arranged over ten dollars a barrel today. So the world is very unpredictable. So the way I characterize a wait and seahold is sitting sort of almost in sort of suspended sort of, you know, saying, well, we don't know what's going on. You know, let's just sit tight. And we
haven't done that. We thought very hard about this, so it's a very deliberate hold the whole is the right thing for the circumstances today, bearing in mind, you know, a very wide range of possible outcomes.
So it means that you're you're holding, but you're kind of ready to go. So how likely is it?
It doesn't mean, it doesn't mean we're sort of poised over the sort of the verbial button as it were. No, what I mean, is it's it's a fought through hold in a sense. Look, there's a range of outcomes. We have to sort of not only consider the uncertainty around the cause of the shock, if you like, what's going on in the Gulf energy prices, but also how the uncertainty around how it passes through into the UK economy, state of demand in the economy, state of labor market,
all these things, you get a range of outcomes. We will not know the second round effects for a while, but we can't wait for the second round effects to be staring us in the face because it'll be too late by then. But it's a considered policy in that sense. It's not a sort of well, this is all too difficult, let's just hope for the best.
So let's say that oil stays at one hundred and thirty dollars per veril for a bit of time. Is that a game changer?
Well, the scenario that we have, the worst scenario that we've said today, actually has sort of features to it. I would say, you're right, it has all going up to around about that level. But actually even even more powerful is it stays above one hundred dollars a barrel until the end of next year, So this is a very prolonged shock. That scenario also has stronger pass through into general prices in it in the economy, because that's
another obviously important part of the story. So that's the scenario in which you generate, you know, a very difficult situation.
I mean, I guess the concern is that oil prices can fluctuate a lot. Second round checks take a lot longer to see. So what are you hoping data wise to be able to pinpoint?
Well before the summer we start, I would say, in a situation before any of this happened, when I was going around the country, films were saying to me pretty consistently they were finding it hard to pass costs through into final prices. We've also seen the labor market softening. We've seen wage settlements softening gradually over time. That was core to our story before any of this came up. Really, but that's the context then, so you know it's a
softer backdrop. So again we have to say, well, okay, there's now been a very difficult obviously shot too. Energy prices gets fed through, but how much is it going to get Fedterugh, that's the question. And what's going to happen to consumer demand, which is say, is looking quite soft, and that sounds.
Our consumers and households thinking of twenty twenty two and the sharp which is why there's been an inflation expectation pick up, maybe quicker than we would have Foune Well.
Inflation expectations have picked up now because they do tend to follow current the shorter end of one year ahead. Inflation expectations tend to sort of follow what inflation is today. But we're also obviously sensitive to the fact that people's memories are important here. They remember the fact that we had high inflation here four years ago, so that's also has a part to play in this, and we do take it into consideration obviously.
I mean, overall, the markets largely see today as fish. Yet your own chief economist was pushing quite hard for a hike. So is it odd having a dissenter coming from the boy's own office.
Well, I wouldn't particularly say stuffish, but obviously that judgment has to be relative to what you thought, what people thought we were going to do. So I respect that that that point, and we have been somewhat pushing against you know, I was pushing against the curve as you know, you know, five or six weeks ago probably now. Look,
I think Hugh Pill's position is perfectly understandable. You know, I didn't vote with him, I didn't agree with him on the end decision, but I understand the point he's making. I would also say, Hugh write this in his paragraph that you use the word modest and I think he used the word modestory deliberately. I mean, he'll speak for himself, but I think that word is deliberately in there. So the differences between us are not that big.
Would it take What would it take for you to actually to vote for a hike next time?
Well, I think we will. We sit down and go through all the evidence, and I think what it will take is and we laid out sort of some of the things we'd be looking at is quantitive and quality. I mean, I think what we get on the quality of side is going to be important, because, yeah, we'll be talking to a lot of business as saying, how are you approaching passing these cost increases through? What are you seeing in terms of demand for your whatever you
produce or provide. We're going to it's going to be some time before we get a real read on wage settlements, because there's quite a seasonality to wage settlements in this country, and we've passed through peak season, which is earlier in the spring. So it's going to be a while before we get a really probably pretty any big read on wage settlements. But we will be looking very carefully at what people are planning for, you know, those settlements that
are coming through. That will be important as well.
How big is the risk of a technical recession at this point, Well.
Most of the scenarios we have actually and against most of the interestrate paths, actually suggest that this is a story of slower growth in the more extreme sort of difficult scenario with some policy. You can have a variety of policy responses. There are some quarters of negative growth. But this is actually, interestingly not as we see it today at least a story of dominating it's going to be a recession. That's not the dominating story at all government.
I mean, so far, you're happy with the market reaction, and also, I mean next week is a big deal in terms of you know, the elections in parts of the UK. Could that be a market event.
I think the market's reaction to it so far today is so sensible on the UK side. I don't come on Tony ekod politics obviously, but what I would say is this the things that I think what we've seen in the interest right curve has been dominated by the golf. The things I look for in terms of when I started to sort of break down what's influencing this, it has the exchange rate move No, not much at all. Actually have we seen much movement in short run sterling
swap spreads? Not much at all. In fact, there's a bit tighter than it was before the budget last autumn, So that suggests it's really actually it's a golf story, I think government.
I mean the final question is NISR warned this week that rates could go one hundred and fifty basis points higher if the Middle East crisis worsened. I mean, can you see any scenario where that would happen?
Well, look, there are really bad scenarios. And if we get if we get cut off of energy supplies going on for a very long period of time, you know, plant things can happen, but it's not it's not in our it's not in our central decision today at all.
But this is what a ten chance. So I don't avoid.
Because I think that the world is so unpredictable at the moment. So we've seen it today, let's alone. You know, over longer periods of time, the world is so unpredictable that I think putting sort of precise, you know, percentage probabilities on things is well put it, put it politely hazardous business.
It's too risky.
Governor.
Thank you so much.
As ever, you're very welcome.