Bank of England Deputy Governor Ben Broadbent said there are some
signs that low inflation is having an impact on wage growth and that
policy makers are in no hurry to increase interest rates.
Speaking
on BBC Radio on Friday, Broadbent said there is “no urgency” to raise
the benchmark rate from a record-low 0.5 percent, where it’s been for
almost seven years.
His comments echo those of Governor Mark Carney who signaled on Thursday that higher borrowing costs are still someway off as the central bank cut its inflation forecast and the Monetary Policy Committee voted unanimously to maintain emergency policy settings.
Broadbent said the MPC “thinks its possible that low inflation out turns are having some impact” on wage growth, though there was no sign of a wage-deflation spiral developing. In the minutes of its policy meeting published Thursday, the MPC said it “remains watchful for signs that low inflation is having more persistent second-round effects on wages.”
The deputy governor presented a bright picture of the domestic economy, saying cuts to the BOE’s growth forecasts had been small and that core inflation, a measure that strips out volatile food and energy prices, had moved higher. He discounted the chances of a rate cut and said the next move will probably be a tightening.
Based on the latest projections, it’s “likely that interest rates will have to go up over the next two or three years,” he said. “The path of interest rates on which the forecast is conditioned is actually higher than the one currently in financial markets.”
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| Bank of England Deputy Governor Ben Broadbent |
His comments echo those of Governor Mark Carney who signaled on Thursday that higher borrowing costs are still someway off as the central bank cut its inflation forecast and the Monetary Policy Committee voted unanimously to maintain emergency policy settings.
Broadbent said the MPC “thinks its possible that low inflation out turns are having some impact” on wage growth, though there was no sign of a wage-deflation spiral developing. In the minutes of its policy meeting published Thursday, the MPC said it “remains watchful for signs that low inflation is having more persistent second-round effects on wages.”
The deputy governor presented a bright picture of the domestic economy, saying cuts to the BOE’s growth forecasts had been small and that core inflation, a measure that strips out volatile food and energy prices, had moved higher. He discounted the chances of a rate cut and said the next move will probably be a tightening.
Based on the latest projections, it’s “likely that interest rates will have to go up over the next two or three years,” he said. “The path of interest rates on which the forecast is conditioned is actually higher than the one currently in financial markets.”
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