BoE’s Bailey: We need to watch services inflation very carefully

• We need to watch services inflation very carefully.
• Services inflation is still above a level that’s compatible with on-target inflation.
• Inflation was lower than expected when the BoE cut rates.
• A gradual approach to removing monetary policy restraint will help us to observe risks to the inflation outlook.
• The most important part of the budget is how businesses respond to higher employment costs.
• Return of inflation to target has been faster than expected.
• Not clear how the national insurance rise will play out.
• H1 GDP growth was noticeably stronger than expected.
• Evidence points to fading second-round effects.
• I see a risk of lingering persistence of wage pressures.
• Recent evidence has been that inflation has been lower than expected but we don’t know if that will continue.
• A gradual approach to rate cuts allows BoE to adjust to evidence.

This article was written by Giuseppe Dellamotta at www.forexlive.com.