Bank of England's Bailey Left High and Dry by U.S. Job Report

Image © Pound Sterling Live, Bank of England

The Bank of England will have to continue raising interest rates at a quarterly pace, even if its Governor wants to speed up the process.

A day after the Bank of England's Governor Andrew Bailey signalled he wants to speed up the pace the central bank cuts rates, the U.S. economy delivered a firm pushback.

The U.S. economy added 254k non-farm jobs in September, smashing expectations for a 147K reading, and in doing so quashed expectations for another 50 basis point rate cut at the Federal Reserve in November.

That 50bp cut matters for the Bank of England and other global central banks that look for the cover of the Fed to cut their own interest rates.

"A 'no landing' scenario for the United States has suddenly become far more plausible, suggesting that expectations for aggressive monetary easing should be ratcheted back across most major economies," says Karl Schamotta, Chief Market Strategist at Corpay.

The payroll data comes a day after Bailey signalled the Bank could step up the speed it cuts interest rates, sating the Bank could be more "activist" on the matter.

This pivot came despite no new economic data that would prompt such a comment.

Instead, it looked like the Governor saw the Fed's 50bp cut in September and the ECB's recent signal that it will speed up cuts as providing the cover needed to change tac.

These U.S. data and subsequent market developments blow Bailey's cover.

"Central banks in the euro area, United Kingdom, and Canada are all now likely to move more cautiously," says Schamotta.

Earlier on Friday, the Bank of England's Chief Economist said he thought it prudent that the Bank continue to proceed carefully.

Pill said he remains "concerned about the possibility of structural changes sustaining more lasting inflationary pressures" in the UK economy.

Speaking to accountants at the ICAEW, Pill said his latest economic modelling tells him "there is ample reason for caution in assessing the dissipation of inflation persistence."

Pill said "further cuts in Bank Rate remain in prospect should the economic and inflation outlook evolve broadly as expected," however, "it will be important to guard against the risk of cutting rates either too far or too fast."

"For me, the need for such caution points to a gradual withdrawal of monetary policy restriction," he concluded.