BoE's Greene: We should not be looking through negative supply shocks
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Some of global economy resilience to US-Iran war is due to inventories Second-round effects of energy price shock won't show up for another year We should not be looking through negative supply shocks Proof of wage, price reaction to shocks has shifted Central banks must proactiv
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4 itemsBoE's Greene: Worth waiting before deciding on rate hikes
The desk believes the Bank of England (BoE) is likely to adopt a cautious approach regarding interest rate hikes, particularly in light of geopolitical tensions stemming from the US-Iran conflict. Per the full note [source], BoE's Greene has indicated that while inflation risks are skewed to the upside, the current sluggish economy and loose labor market may mitigate the second-round effects of energy shocks. The market currently prices in a 42% chance of a rate hike in June, which suggests that upcoming economic data will be pivotal in shaping expectations ahead of the meeting.
Central bank trade-offs
The desk is highlighting a challenging environment for central banks as geopolitical tensions, particularly the conflict in Iran, contribute to rising oil prices and a negative supply shock. This situation complicates the trade-off between growth and inflation, as discussed in the recent BofA Global Research podcast featuring Ralf Preusser and his colleagues. Per the full note [source], the implications for monetary policy are significant, with central banks needing to navigate a delicate balance that varies across major markets. As traders assess these dynamics, positioning in rate markets is expected to shift, reflecting the evolving landscape of growth and inflation expectations.