EU CONSUMER STAPLES: Nestle: 1H results

Other highlights from his vote decision:

• "Before finalising my vote I challenged myself on whether sequential cuts in Bank Rate in May and June would be appropriate if it subsequently became clear that risks to inflation were actually weighted to the upside. It was a finely balanced judgement for me but I concluded that my approach was robust for two main reasons."
• "First because even at 4% I assess that monetary policy would remain clearly in restrictive territory. So if evidence emerged that pointed to higher inflation in the medium term then Bank Rate could be held higher for longer than would otherwise be the case."
• "Second given the environment we are operating in I think it is important that monetary policy is outlook dependent and should respond and be seen to respond when the evidence on the outlook requires it."
• "I continue to take a watchful and responsive approach to setting policy. I think this is in line with the emphasis the MPC puts in its collective communications on policy not being on a pre-set path and that we will consider the degree of restraint which is required from meeting to meeting."
• "I see no inconsistency with my latest vote and the MPC’s gradual and careful approach to the withdrawal of restrictiveness. This has served the MPC well over the last year as we have cut Bank Rate four times by a total of 100bps in total. And I believe it will continue to serve us well in these times of increased uncertainty and unpredictability, as long as the disinflation process is judged to be continuing, in order to return inflation back to the 2% target sustainable in the medium term."

No feedthrough into core global FI markets as crude oil moves lower after U.S. President Trump noted that China can now purchase Iranian oil. 

• Global crude oil benchmarks lost over $1 on the comments, although session lows in Brent & WTI went untested.
• The headlines point to a freeing up of Iranian barrels/looser sanctions. This is a sharp turn from expectations of Iranian oil supply tightening over the last few weeks as the conflict with Iran flared.
• Our commodities team notes that further details are unclear at the moment, although highlight that U.S. sanctions on Iran have made it harder for Chinese buyers to get oil to their refineries. This has forced them to resort to more complicated measures to evade sanctions.

Ramsden: "Given the relative stability in the baseline forecast what is it about the outlook that has influenced my thinking? The short answer is the cumulative evidence of a continued material loosening in the labour market. As a result while I still think the risks to inflation continue to be two-sided I’m now attaching more weight to the downside risks in the medium term."

• Speech goes into more details on the labour market - as expected given his dovish dissent last week.
• Full text available here.