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UK employment boom poses inflation risk, Bank of England officials warn

A senior UK bank official said the rapid growth of the UK labor market poses significant risks to future inflation paths, even if the current rise in global commodity prices is likely to ease.

BoE Vice President Ben Broadbent did not make a clear steering as to whether he would tend to vote for interest rate hikes when the Central Bank’s Monetary Policy Committee meets this month.

Other MPC members have recently Sustainable inflation risk However, he also refrained from providing clear instructions on when to vote to tighten monetary policy.

Economists expect the majority of MPC members to decide to keep interest rates at a record low of 0.1% on December 16 as they are waiting to assess the effects of the new Omicron variant of the coronavirus. I am.

Broadbent told the Leeds audience that the BoE is facing “a very difficult time for monetary policy” and inflation is at the central bank’s 2% target, despite weakness in the world and the UK for two years. He said it would rise “far north.” economic growth.

The UK consumer price index rose 4.2% from a year ago as inflation reached its highest level in almost 10 years.

Broadbent said the Bank of England’s households continued to spend their living expenses as the BoE was caused by a surge in global demand for commodities, coupled with supply chain disruptions due to blockades in Asian countries hitting production. He said he couldn’t do anything to protect him from the rise.

Spending changes associated with new telecommuting habits now seem tolerable, but by the time monetary policy changes take effect, price pressures on trade goods are “more likely to subside than intensify.” He added.

But Broadbent made a far more mean note about the risk of inflation posed by the unexpectedly tight UK labor market.

He said higher public sector employment may be part of the explanation. Even if some of this was temporary hiring, the government’s spending plan suggested that permanent employment in the public sector was set to continue.

Broadbent said some of the labor market tensions could be due to “fast hiring,” which would ease over time.

However, there was also “risk of rising wage costs due to current high inflation” if workers demanded higher wages to offset the rise in living costs.

Broadbent said a temporary rise in imports rarely had a significant impact on monetary policy. This is because the shock usually passed before the change in interest rates worked.

But “the risk of future inflation from a tight labor market may be more significant,” he added.

UK employment boom poses inflation risk, Bank of England officials warn

Source link UK employment boom poses inflation risk, Bank of England officials warn

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