BoE Deputy Governor Clare Lombardelli warns of persistent inflation risks, though GBP/USD remains muted at 1.3425 ahead of key US economic data releases.
The Deputy Governor warns that conditions for persistent inflationary dynamics over the medium term are crystallising, with the balance of risks to inflation to the upside and growing second-round effects. This reduces the likelihood of near-term BoE rate cuts, which typically pushes gilt yields higher. The effect is indirect, as bond markets are not mentioned in the article.
BoE Deputy Governor Lombardelli's hawkish comments (upside inflation risks, persistent energy shock, second-round effects) point to a tighter BoE stance, which should support Sterling. However, the article itself notes GBP/USD showed little reaction, trading around 1.3425 and down 0.12% on the day as the dollar firms ahead of US inflation data at 13:30 GMT.
Bank of England Deputy Governor Clare Lombardelli signaled persistent inflationary pressures at the Bank of England Watchers’ Conference on Tuesday. She highlighted that energy shocks and potential second-round effects are creating upside risks to inflation, even as the labor market remains in low gear. Despite the hawkish tone, the British Pound showed minimal movement, trading down 0.12% at 1.3425 as markets await US inflation data.
Upside inflation risks and possible second-round price effects reduce the case for near-term BoE rate cuts, which tends to push benchmark gilt yields higher.
The dollar was firming ahead of US inflation data due at 13:30 GMT, and the pair showed little reaction, trading around 1.3425, down 0.12% on the day.