Bank of England’s Bailey: Thinks the next move on rates will be a cut

BOE’s Bailey answering questions says:

• He will consider IMF recommendation of more MPC press conferences along with Bernanke suggestions
• He expects quite a drop in April inflation data
• Question is how long we maintain this level of monetary policy restriction
• Expects next move on rates will be a cut

How does Bailey know the April CPI will come down in April?

Looking at the data from a year ago, UK CPI rose 1.2%. Moreover in May, the CPI grew by 0.7%. My guess is the inflation will not be nearly as high the next two months. As a result, that would lead to a sharp fall in the year on year calculation not just in April but also in May. The current YoY inflation is at 3.2% for the headline. Roughly 1.9% will roll out of the calculation starting in next month. So the YoY could fall quite dramatically dependent on the MoM levels over the next 2 months.Even if the next two months come in at 0.5% each month, that would imply a YoY inflation rate at around 2.3%. If the rates for MoM come in at 0.3% (0.6% total), the YoY would decline to below 2%.

This article was written by Greg Michalowski at www.forexlive.com.