(Bloomberg) -- Bank of England Governor Andrew Bailey cautioned markets against reading too much into how policymakers voted this month after a surprise switch by one official prompted investors to boost bets on more interest-rate reductions.
Following the decision to lower rates by a quarter-point to 4.5% on Thursday, Bailey told Bloomberg TV that he understood the dovish reaction after ultra-hawk Catherine Mann became one of two rate-setters to unexpectedly back a half-point reduction.
However, he urged investors not to “put too much weight on the voting” and said: “I would encourage the market to read the minutes pretty carefully this time, because you will see a series of positions set out in the voting.” The vote split, he said, is not a “communication tool.”
Traders zeroed in on Mann’s vote despite more cautious signals from the BOE in its inflation forecast and guidance that warned of a “gradual and careful approach.”
Investors took heed of Bailey’s comments to Bloomberg TV, trimming their bets on further monetary easing. Money markets priced around 60 basis points of further cuts in 2025 compared with about 65 basis points before Bailey’s interview.
That softened the pound’s losses Thursday, though it remained the worst-performer among major currencies, trading 0.6% lower at around $1.244.
His remarks went further than an earlier suggestion that investors should “not over-interpret any other moves in voting patterns.”
Up until Thursday’s vote, Mann was seen as the most hawkish rate-setter on the Monetary Policy Committee and had not supported the previous two reductions.
However, she had signaled a willingness to dramatically change course if she saw enough signs of inflation persistence easing. In a speech in November, Mann advocated an “activist” approach, meaning she would move quickly and forcefully when needed.
In the Bloomberg TV interview, Bailey said that the addition of “careful” to the BOE’s language reflected the greater uncertainty facing policymakers but did not necessarily mean slower cuts. “That uncertainty is two sided,” he added.
--With assistance from Aline Oyamada.
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