Bloomberg Audio Studios, podcasts, radio News. You were surprisingly close to a Holt. Can you explain that?
Well, I wouldn't say Holt, I would say I was much more balanced. Well, I was balanced going into it from at the end of the last meeting, thinking well, I'm really open minded for the next round and we'll see what happens. So I think, you know, my mind was certainly open at that point as to where we would go next.
But the decision could have gone to a hold this time. So how should markets interpret that?
Well, I think market shinterpted is we're in a situation where there are risks on both sides of this situation. There are a risk that demand could be considerably weaker than we expect it to be. That could pull down on inflation. We would then need to put lower interest
rates than we're predicting. There's the risk on the other side that this process of adjustment was removal of the sort of persistence of the fects from the inflation we had for years ago isn't going to materialize in the way we think it is, And also that the supply capacity of the economy remains more limited. We don't get the sort of supply growth that even that we're thinking we're going to get and that will cause inflation to be higher. Now, I we did it in two parts.
We started with the sort of domestic situation and then sort of in the sense, brought the tariff and trade news into it. On the domestic situation, this is sort of crucial to your question about sort of you know, how near or how far were you from action. An important part of the story is actually where particularly where the pay story is going in this country. Is it going to you know, it's it's higher clearly than consistent at the target. Is it going to come down during
the course of this year? Are we starting to see the sort of the signals And my conclusion sort of pouring over the evidence and the last few weeks as we went into this decision, is I can see enough in there. Yeah, that I think we are begining to see in the sort of higher frequency data that we are seeing some scientific coming off, even though in the official slower frequency data, actually you don't really see so much of that at the.
Moment, Governor, I mean, Murgis are now almost ruling out to move in June. Is that the right interpretation?
I suppose The only thing we can say in confidences in the world we're in at the moment is that a lot's going to happen in the next whatever it is six weeks or so. I mean, it really is going to happen. I mean a lot really is going to happen. I suspect, So I have to be honest with you again. You know, I'm very open minded about every meeting is by the way, every meetings live for us. That's our philosophy. It's it's not a shifting philosophy, that's
a permanent philosophy. So I'm very open minded about it, frankly because I think we'll know a lot. We'll know a lot both domestically and internationally. Well, there are a lot more about pay actually, because there's a peak of pay settlements that we will know more about because we're sort of just going through that, and I think we can probably guarantee we're going to know more internationally. Stuff will happen.
How much uncertainty does the UK US trade deal actually take off the table?
Well, I think it's obviously good news now. However, the UK is the very open economy, so when we formed our view, it's not just about the UK US bilateral trade relationship. It's about how all the other relationships with the world come back to the UK as it were in terms of the openness of the UK. So I really hope, because I do think this is very good news on the UK US front. I hope it's the first of many, because that's really what we need to see.
It is a trade deal with the EU. The bigger prize.
Well, it's important. I think China's very important as well, frankly, but those are important.
Ones, Yes, which ones are more important US, China or UK? You for the UN, I don't.
Actually have a rank, order to be honest with you. I think it's it's because of the sort of the sort of other fluctuation nature of the situation. We do not have a sort of you know, a league table of importance in that sense.
How big would the growth downgrade had been if not for the looser financial conditions?
Well, yeah, okay, it's a slightly hypopoctical question obviously, because they did move. Obviously, our sort of taking a part of the of the components would have suggested that the impact of the world on growth next year and actually is not a bad place to lock Actually would have been about point three. I think something like that without then and of offsetting effects of financial markets, and so.
Again going forward, given all the uncertainty, do you you know, what does it mean for cuts? How should market interpret what we're seeing in you know, longer term?
So I think the path is still gradually and carefully downwards. I don't think that that path is done. A lot will depend also, of course, on the say, on these important domestic developments. But I'm not going to make predictions about you know, how quickly how much, because there is say, there is so much now in a sense that we're going to learn in the next in the coming in the coming time. But I do think the underlying path is down as we are going to get a bit
of a bit of a bump up in inflation. I'm afraid we know that it's going to be in the next release because it's it's in these sort of so called administered prices, which we already know. But our view is it's not it's nothing like what we what we saw a few years ago. And we do think in the current situation, you know, it's reasonable to look through that does.
A terminal rate at three and a half percent sound reasonable.
Well, again, I think judgments on the terminal rate and conditions of uncertainty like this are frankly, you know, quite quite heroic at times. Obviously the market makes those judgments. Market has to make those judgments. Uh, you've seen the profile that we've published today with inflation based on that market profile, and it doesn't look an unreasonable one.
Going forward to how concerned are you about the surgeon pound? Does that have any impact on.
How much the word surging is is quite dramatic because Stirling has been a little bit sort of in the middle. Actually, so you've had obviously we've obviously we've appreciated against the dollar, but we've depreciated against some other currencies, so we've relative to some others, we've been somewhat in the middle. Actually again, yeah, we factor it into our our forecast. I think we also have to look at it quite carefully as to
why is it searching? Because I'm not sure that just apploying the usual theory of interest parity you know, tells you all the story. In fact, it doesn't touch it because our staff do a lot of work to sort of pick the bones apart, and they'll tell you actually that's not really, that's not really the story. So I think it's more going on than just that story. So again we have to look at you, what degree I sort of risk Premiu coming into the into the market in that sense,