Pound Surges To One Year High After Carney Says He Is "Among Majority" Expecting Tighter Policy

Having surged earlier in the day following an unexpectedly hawkish BOE statement, moments ago GBPUSD jumped to fresh session highs after BOE Governor Mark Carney said the pound"s decline is boosting prices, and added that he’s among the majority of MPC with view that policy may need to be tightened in coming months.  Some other comments:

• CARNEY SAYS HE SEES SHIFT IN BALANCING ACT FOR BOE


• CARNEY SAYS WE WILL TAKE DECISION ON RATES BASED ON DATA


• CARNEY SAYS POSSIBILITY OF A RATE HIKE HAS DEFINITELY INCREASED


• CARNEY SAYS TALKING ABOUT A MODEST ADJUSTMENT IN INTEREST RATES

The jawboning, which in typical central banker fashion was not accompanied by any action, sent cable to session highs just shy of 1.3400...

... and the highest since last September.

Adding to the urgency, is a note from Goldman in which the bank has revised its call, and instead of seeking a first rate hike in Q4 2018, Goldman now expects it to take place in November. The full note:

European Views: BoE — on hold, but greater urgency in its tightening bias. We change our call to a November hike

• The BoE"s MPC voted 7-2 to leave Bank Rate unchanged (at 0.25%) at its September policy meeting. Mr McCafferty and Mr Saunders continued to vote for an immediate rate increase.


• All MPC members agreed that "monetary policy could need to be tightened by a somewhat greater extent over the forecast period than current market expectations". But in a key hawkish development relative to what we expected, "a majority of MPC members" signalled that they have a bias towards tightening policy "over the coming months".


• The bias to tighten policy in coming months is based on "the prospect of a continued erosion of slack and a gradual rise in underlying inflationary pressure". It would require some downside news to discourage the MPC from raising rates in coming months.


• We change our call to expect a 25bp rate rise in November, rather than a first rate rise in 2018Q4. We do not change our fundamental outlook for the UK economy. We view today"s communication as hawkish news on the BoE"s reaction in the face of a broadly unchanged outlook. After November, we expect the next subsequent rate rise in 2018Q4.

In parting we will just say that the BOE has been here many times before, with Carney warning of imminent rate hikes as far back as 2014. We are still waiting...