00:00The split has the markets a little bit in a tiff. Is it really an indication of policy going forward?
00:06I think the voting is a very good reflection of the finely balanced decision.
00:12My message to markets is don't read more into it than that.
00:16It's a reflection of how finely balanced this decision is.
00:20Now, what does that mean, you're going to say?
00:21Well, we've got risks on both sides.
00:25So we're always expecting that we're going to see this rise in inflation.
00:29It's not a big one, but we're expecting to see it.
00:31It's a little bit bigger than we thought it would be.
00:34So we have to be very focused on are there going to be consequentials from that?
00:38On the other hand, I think the labour market is softening.
00:42Pay has come in a bit below where we thought it would be.
00:45That's the downside risk.
00:47Is that going to pass through?
00:49And the context is one of softer conditions, weaker inflation.
00:53And we're balancing that.
00:54And so different members take different positions.
00:56And I've always encouraged that.
00:57And, you know, the only thing I do insist on, which we've done, is obviously that we reach a decision, which we've done.
01:03Of course, we've done that.
01:04But that's the point.
01:05I mean, I think the balance of views is a very accurate reflection of how finely balanced it is.
01:09But has the MPC ever been so divided?
01:11We've actually never had to be in this situation of having to have two votes to produce the majority.
01:19Absolutely fine.
01:19We can do that.
01:20You know, not difficult.
01:23But again, I think it's a reflection of just how finely balanced the situation.
01:26So my message to markets is that this is a very finely balanced situation.
01:29But finely balanced or complicated?
01:32Well, I think it's finely balanced.
01:34I mean, you might say that there's a lot of things going on under the surface in terms of influences on it.
01:40But it is finely balanced.
01:42Investors or markets are pushing back almost to actually no cuts this year.
01:47Could that make sense to you?
01:48Well, I think the fact that pricing is now, you know, more sort of 50-50 going forwards, I think, is a reflection of the fine balance.
01:58So that doesn't surprise me.
02:00But you're happy with that?
02:02There's no...
02:02Well, I try to avoid pronouncing that.
02:05That's a slightly sort of grand scale.
02:08But look, I think if we say something is finely balanced, I'm not surprised when you see that outcome.
02:13Perhaps that's the best way I can put it.
02:15So, Governor, I mean, when you look at, you know, the cycle, are we starting to approach the end of the easing cycle?
02:23I think the path is still downwards.
02:25And over time, I think there's more uncertainty about the sort of, you know, step by step, exactly when the steps are taken, put it that way.
02:36Are you expecting a stabilisation when it comes to the labour markets?
02:40I mean, was April the worst of it because of some of the things that the government put in place?
02:44Well, what we've seen in the last... since May, when we did the last market policy report, is we actually haven't seen a lot of news on activity and the outlook for activity.
02:54What we have seen is actually pay increases come in a bit below where we thought they would be.
02:58Now, given that we were starting from a level where they were considerably above, obviously, any level that's consistent with the inflation target, the fact that that is happening, obviously, is welcome news.
03:08But that's the context in which we, you know, a good part of the context in which we have to reach the judgment.
03:13So how do you look at the labour market over the next couple of months?
03:17Well, we think, you know, interestingly, our agents around the country who did the...
03:23they do an annual pay settlement survey at the beginning of the year.
03:25So at the beginning of this year, they said they thought it would come in around about 3.7 as the sort of the middle of it.
03:32And we think it's actually pretty much on course for that.
03:35Inflation. Talk to me about inflation and the possibility of second round effects, given all of the tariff turmoil that we're seeing in August.
03:43So, yes, I mean, there's obviously a vast amount of news being generated in the world economy at the moment.
03:49And we have to factor all of that in.
03:51However, having said that, actually, in our deliberations, I can say to you that actually it was the domestic situation that was more important.
03:57Now, that's not because I'm in any sense relaxed, in any sense dismissing the whole tariff issue.
04:03It's important.
04:04And, you know, by the way, I mean, you know, we've obviously had the news that we've had since May means that the sort of average tariff level is a bit lower than we thought it would be in May.
04:15But it's still well above, obviously, where it's been in history.
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