Sold a Dummy

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Timing is everything. If Mervyn King had delivered his 'calm down dear' speech just after the publication of the MPC minutes rather than just before, we'd be looking at a far different set of near term interest rate expectations in the UK market today.

As it is, the market has raced back to fully price in two quarter point cuts by year-end. Of course, we need to remember that King's speech (in which he basically outlined some good reasons to keep rates on hold for a while yet) did take place after the crucial MPC policy meeting where, it turns out, two members voted for an immediate rate cut - a move in which King himself was clearly not interested.

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