Well known dove Gertjan Vlieghe has taken a big step over to the hawks nest.
Speaking about the outlook for the UK economy and monetary policy at the Society of Business Economists' Annual Conference, Vlieghe said "The evolution of the data is increasingly suggesting that we are approaching the moment when bank rate may need to rise". He also said that he may support raising interest rates in the near future.
This admission by a senior dove has drastically increased the chances of rate hike, not only to early next year, but the chances of a move in November is now above 50%, compared to 33% just two days ago.
This has sent the pound (GBP/USD) into overdrive, smashing through major resistance between 1.34 and 1.35. It is now printing prices we have not seen since the Brexit referendum. The liklyhood of this market closing the gap that was created in the market back on the 24th June 2016 is definitely higher now. This would see GBP/USD trading at 1.3659.
Chart 1: GBP/USD Daily Chart
Message received loud and clear
With the Vlieghe comments coming out just a short time after the MPC announcement, it appears that the Bank of Englands intention is to send a message to the market that a rate hike is closer than originally anticipated.
The view that they are increasing their options is still valid but it certainly leans more to the hawks camp given the timeframe we have seen between messages.
Watch for CPI & GDP figures
The next CPI and GDP figures are due in the middle and at the end of next month respectively, should we see continued strength in inflation and a positive GDP number that will again increase the probability of the BoE moving in November.
My bets are still for a move next year, however it has now changed to early next year and if I were betting on it, I would put less on the bet than I would have last night!
Disclaimer: This should not be taken as investment advice, it is simply just my opinion.