SPAIN AUCTION RESULTS: Oblis / Green Obli

• "I have been on the more cautious side of our rate cutting cycle, because of all these indicators that there could be inflation persistent, there's also an uncertainty. I do think there are risks on both sides, though, actually. So I'm also careful in our lingo, I think that the tariffs actually represent more of a disinflationary risk than an inflationary risk, though, and so we'll have to see how that develops going forward."
• On the neutral rate: "When we ask investors, they say somewhere between 3.25 and three and a half percent. I don't think that's totally unreasonable."

• "The big risk, I think, is that there could be a shakeout in the labour market. We could see unemployment tick up. There are no signs of that yet. Actually, even though the NICs and the national living wage have come to be so it might be a bit too soon, we see in the kind of forward looking, PMI employment indices, they were really falling before they weren't performing well but actually the most recent one they've ticked up which suggests a lot of that was around kind of sentiment around the NICs rather than actual expected behaviour."
• "If we look at other metrics of wage growth, they're also pretty high. And that's important, because that's a huge input into services inflation, which tends to be more domestically driven, and so that's something that we're looking at a lot. Services inflation in the UK is around 5% higher than also other developed economies, and that's a sign that maybe there is some inflation for citizens."
• "The disinflationary process is underway, continues to be underway, as we see it in the data. I'm worried about services inflation, as I mentioned, because it is an indicator of domestically driven inflation, which we can actually do something about. It's the biggest contributor to inflation in the UK, the biggest part of it is actually pay growth, which is why I'm also focused on wages. But one factor that pays into wage growth, of course, is inflation expectations. And we've seen household inflation expectations rise. And that goes for both short term measures and measures the ladder is a bit more worse than actually usually those rise. So I think they remain well anchored. We've looked at kind of the relationship between inflation expectations in the economy pre COVID, and come up with kind of bands of reasonable inflation expectations now, and where we are is within those bands, but towards the top of it. So it is something I'm looking at as another sign of inflation persistence."

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