the mpc must set policy to achieve a sustainable return of inflation to target.ation back to target and keep it there once the effects of temporary mainly those caused by the referendum in sterling, to dissipate. straightforward. with inflation high, slack disappearing, and the economy growing, inflation is unlikely to return to the 2% target without some increase in interest rates. of course, these are not normal times. redefine the uk's relationship with our largest trade and investment partner and will have consequences for the movement of goods, services, people, capital, and the real incomes of u.k. households. the mpc has repeatedly emphasized that monetary policy cannot prevent either the necessary real adjustment to new trading arrangements or real income growth likely to accompany that adjustment. we can, however, support the economy during the adjustment process. in such exceptional service -- circumstances, the mpc is required to balance a trade-off between returning inflation to at the time of the referendum, the mpc set out our framework for doing so

in such exceptional circumstances, the mpc is required to balance any trade—off between the speed atobs and support the monetary policy provides to jobs and activity. at the time of the referendum the mpc set out a framework for doing so and we followed it consistently ever since. the mpc‘s assessment for inflation published today is broadly summer to oui’ published today is broadly summer to our projections three months ago. that was part of the news conference in the last hour or so. (on all of that. let‘s cross over all of that. to the city now to out business correspondent, ben bland, who can tell us how markets have digested today‘s announcement. over to you. yes, this is the graph that traders and economists in the city have been watching very closely, the far right side of the screen, you can see that tiny uptick, that is the interest rate increase we have seen today by the bank of england from 0.25% up to 0.5%. there was a flurry of activity when the rate came through, people discussing it on the floor and everybody was tuned into that press conference by the governor of the

all of us are here, as is always the case, to explain the decision the mpc has taken today.'s the first rate rise in a decade. the last time there was a rate rise cycle was 14 years ago. i just wondered if all other things being equal we don't get any sort of surprise negotiation outcome of brexit, could we see this as a starter rate rise cycle? well, the first thing to say is that, as we have stressed that all of our communications and my opening remarks, our forecast is conditioned ona remarks, our forecast is conditioned on a market curve which is two additional grade increases over the forecast and we need those two additional rate rises to get that return of inflation to target. in fa ct, return of inflation to target. in fact, if you look closely at the forecast, inflation approaches the target, it does not quite get there and the economy is likely to be in a position of excess demand, in other words, running a little high at that point. so the judgment of the committee has been that that‘s the right way to balance the trade—off at this point. there is another way to i

it's a supporting argument referred to by the mpc when we see their decision which is widely expectedo be an increase in interest rates tomorrow we shouldn't get too excited about the ability of a quarter point change in interest rates to suddenly change the consumer borrowing climate. if the mpc are worried about this, they may have to go further than just a quarter point tomorrow >> the chancellor has an important budget coming up does he have any fiscal leeway at all, which is going to be as important as any monetary policy changes? >> i think he does, the budget deficit figures that we had so far this year, they've been relatively positive. the deficit coming down into one i would say the safety zone of below 3% of gdp. that means he doesn't have to keep grinding it down in the short-term he has a bit of scope to provide relief to the economy. >> very nice to see you. it's been a good couple of hours. tomorrow our guest host is louis costo. coming up next for european ews, "street signs," for u.s. viewers, "worldwide exchange." these birds once affected by oil are heading back hom

do you think they were right to go >> if i was right on the mpc, i probably would have voted against it it's not like 20 110, 2011 where it was not driven by domestic inflation it was driven by concerns over potential output in the uk. but also by brexit it meant that the bank had to be more worried about the stability of inflation expectations about the pound than they otherwise would have been. this is part of what happens with brexit. the bank of england is not back to the '70s, but it's more like an emerging market central bank in that it has to take the external situation into account. it just can't set policy based on domestic inflation. >> we're seeing in the uk the data beginning to slow down a bit. of course the political back drop has begun to weigh on the currency do you think going forward the currency will be the main release valve for how brexit negotiations are going >> i think the day-to-day month to month movements in the markets will focus on negotiations that's not that important. for some people watching who trade it is, but for the british people and the british

in some ways, you could argue today all comes down to the credibility of the mpc.t backed itself into a corner with what has -- it has marketying and the interpretation. fully pricing in a rate hike to come today. going tork carney justify that with a lot of people saying this is the wrong time to hike. even more important will be the forward guidance from the bank of england. is this going to be a hawkish hike or a dovish hike? there is the outside possibility of a no hike at all. there are a lot of shades of gray in between and mark carney will have to manage that in his press conference about the future path into 2018 and 2019 and manage how the markets react to that to an extent. if we get a dovish disappointment today, the pound could fall quite substantially. covered so many of the issues, but let's talk about how the breakdown will grow. what would be considered a hawkish hike? when we see those numbers drop and look at how the pound will be reacting, is it going to be 6.34, 6.2? what can we take away from the voting record? 6-3 votensus view is a . dissente

decade, it is really just reversing the cuts that came after brexit. 7-2 was the vote we got from the mpcinking its was was going to be 6-3, but you can see from the market reaction, pounds sliding. also repricing in terms of expectation of further hikes. the market is interpreting this as a dovish hike. theone key thing off statement was something mark carney has said before. markets are underpricing the future rate hike path. it was not in the statement today and also, highlighting the risk from brexit. two signs there that although we got a hike today, it is firmly dovish. >> a day late but a done deal, house republicans unveiled their long-awaited tax reform plan. >> with this plan, the typical family of four will save $1182 a year on their taxes. >> this is our opportunity to make tax reform a reality and deliver the most transformational tax cut in a generation. >> the entire battle will be fought on individual tax cuts rather than corporate tax cuts. lobbyists are working for the corporations, but the taxpayers are the voters. a are the people congress will respond to. democrats wi

you can follow the action live live.itter using #mpc after the speaker, we will have a question and answer period. i would ask each of you to stand briefly as your name is announced and hold off on the applause until afterward. welcoming the intern at weiner public news and a student at georgetown university, bravely studying journalism and government. we want to note that she is working with the headliners team member who organized today's luncheon. that is robert weiner, president of weiner public news. thank you for all of your work. gillian rich is a reporter at investors business daily. the vice president for external and corporate relations with the world bank group. , our local abc affiliate. 's chief executive officer at the world bank. skipping over the podium, to my martin, betsy fischer executive in residence at american university. speaker,over our guest the senior economic adviser writer. the captain with the u.s. navy, retired executive director of first global challenge. thank you for your service. a little sleight-of-hand and musical chairs. fiirman and ceo of investment gr

the argument the mpc has to do is look at what inflationary is going to be in the future, and basicallyd and the data show is this sharp increase in inflation that we've seen was driven by a once off cropping the exchange rate, so their forecast is inflation is just going to drop away, so raising rates is just not necessary, because inflation is going to go back to target on its own. and if you look at the rest of the world, inflation is well below target, so the argument that you need to do this to solve inflation is untrue. remember in 2008 we had the same argument, inflation was 5%, and that was an argument why we shouldn't deal with the fact that uk had gone into recession. so inflation is an issue, but essentially this shock that we haveis but essentially this shock that we have is about to disappear. but why would the bank take a measure which according to your analysis is going to lead to exacerbating the problems that are already there? well, i think it's probably absolute incompetence. we saw that in 2007. we have seen it in the european central bank a couple of times in 2011.

is the first hike in a decade, reversing the cut that came after brexit. 7-2 was the vote from the mpcat was slightly more conviction on the monetary policy committee than the consensus was thinking. pound sliding, gilt yields falling, repricing in terms of expectations for hikes further along the curve. the one key thing missed off the statement was something mark carney has said before, markets are underpricing the future rate hike part. that was not in the statement today. they highlighted the risks from brexit. although we got a hike today, it is quite firmly dovish. has the unreliable boyfriend regained his credibility? nejra: that is a great question. people are asking why the bank of england may have bothered to raise rates today as we got a more dovish outlook further along the rate hike path with mark carney saying the market's pricing it right at the moment, you could argue that hike today came largely to maintain credibility. markets had been fully pricing in this hike today given the forward guidance we had from the bank of england previous two -- fromat previous two the ba

not look like it is going well, to be able to provide that it up extra stimulus in the view of the mpcancine: what does this mean for investments, actually, when you look at gilts, geraldine? what is your bet on the pound? geraldine: it is very hard to have a strategy that has a high degree of confidence because really, the chancellors of the transition deal is really going assetthe key reason the will do well or not. we think there is a slightly better chance of 50% that we get a transition deal by the end of the first quarter of 2018. that said, this is not a very high percentage. taking any large physician in the u.k. -- taking any large position in the u.k. is probably too brazen. we think the level of yields currently not attractive compared to two other levels int h the world. if you want to think duration, we think you are better off in the u.s. in terms of the pound, we are relatively neutral. francine: we have a pound chart coming up, and i wanted to ask you about volatility. this is a simple chart looking at u.k. employment and this is the average weekly earnings growth. when

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with us in the studio is a bronwyn curtis, an economist who can explain what the members of the mpc willare nine members of the monetary policy committee and some of them worked at the bank of england and some are external members and each of them has an individual vote. last month they voted 7—2 against raising rates, or making any changes to monetary policy. but the bank of england governor, mark carney, has been signalling, and other members of the committee have been signalling that perhaps it is time to take the foot a little bit off the accelerator. they are not saying they are taking it up completely, butjust to put rates up a little bit. what do they ta ke rates up a little bit. what do they take into account before making their decision? what areas of the economy are they looking at? the main thing is they have a target for inflation, 2%. they have not met it. it was 1% a year ago and now it is up it was 1% a year ago and now it is up to 3% mostly because the pound has dropped and the goods we are importing like cheese or olives, i'm much more expensive. it has risen to 396 much