BOE's Bailey on Warsh Jackson Hole Speech, UK Inflation

Summary

Bank of England Governor Andrew Bailey discusses Fed Governor Kevin Warsh's Jackson Hole speech, forward guidance, and the UK inflation outlook. He says UK second-round inflation effects remain subdued and AI and robotics are key to faster UK productivity. Bailey also comments on BOE balance-sheet reduction and longer-run fiscal challenges.

• Bailey calls Warsh's Jackson Hole speech one of real substance on monetary policy framework and forward guidance.
• He argues forward guidance risks making unconditional policy statements in an uncertain world.
• UK second-round inflation effects are subdued so far, with a softening labor market.
• Bailey says the BOE can watch the inflation situation for now but reassesses every meeting.
• He says the BOE will not mechanically follow Fed rate moves and will base policy on UK conditions.
• AI and robotics are seen as critical for UK productivity growth and may create demand or supply shocks.
• The BOE will decide on balance-sheet reduction in September to reduce interest rate risk.