Bank of England Monetary Policy Committee (MPC) member Mann stated that tightening now to keep inflation anchored means that less tightening is required later. She noted the risk that inflation will stay above target for longer than expected given the size of the inflation shock and a tighter monetary policy is warranted. As far as the May decision is concerned, she stated that consumption developments and whether there is evidence of wider pricing pressures will be crucial. Overall, she was worried that weakness in consumer spending would not come quickly enough to stem price increases and increase pressure for higher rates. Governor Bailey stated that the bank is treading a very tight line between taming inflation and heaping greater woe on the economy. According to Bailey, developments in the labour market will be crucial and whether there would be an easing of very tight conditions. Markets continue to expect a further rate hike in May.
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14:30 BoE’s Governor Bailey Speech
Euro-zone ECB President Lagarde stated that policy will depend on incoming data and that it was vital to maintain operational flexibility which had little impact. The Euro-zone consumer confidence index improved to -16.9 for April from -18.7 previously, but confidence in the outlook remained fragile while Ukraine fears also sapped potential support. The Euro was unable to make further headway and overall yield spreads supported the dollar.
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13:00 ECB’s President Lagarde Speech
US initial jobless claims edged lower to 184,000 from 186,000 previously and slightly above consensus forecasts while continuing claims fell to 1.42mn from 1.48mn. The Philadelphia Fed manufacturing index declined to 17.6 for April from 27.4 the previous month and below market expectations of 21.0. Production increased at a slightly faster rate on the month, but there was a slower rate of advance in new orders while unfilled orders increased more slowly. The labour market remained stronger with a faster rate of employment increase on the month. Inflation pressures remained very strong with the prices paid index increasing to 84.6 and the highest reading since June 1979. Companies were less confident over the outlook while inflation pressures were expected to ease slightly.
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