- There is more demand pressure in the US
- I see strong evidence that process of disinflation is working its way through
He’s touched on a key puzzle in markets that Goldman Sachs also wrote about earlier. The question is: Why? Is it 30-year fixed mortgages? Is it running a deficit at 7% of GDP? Is it something else in the US?
The answers to those questions tell you if it’s a long-term problem or one that will work itself out with a few more months of high rates.
However I wouldn’t look to Bailey for those answers as up until very recently he was arguing that UK inflation dynamics (hotter) were different than the US and Europe.
This article was written by Adam Button at www.forexlive.com. Source