Andrew Bailey hints that the main obstacle to UK rate hikes has been removed
The governor of the Bank of England acknowledged on Monday that the end of the UK holiday program has so far produced little additional unemployment, indicating that the main obstacle to seeking interest rate hikes has been cleared.
In providing evidence to the House of Commons Finance Committee, Andrew Bailey stated that investigations in the past few days have shown “low [unemployment] More than our prediction implies.”
He declined to say whether this was enough for him to vote for an increase in interest rates from the current historical low of 0.1% at the Bank of England’s December meeting. “I’m not saying that we will definitely [raise rates] Next time,” Bailey said.
The statement by Bailey and three other Monetary Policy Committee members reinforces the view that the Bank of England has grasped the triggers for the first interest rate hike since 2018, but it still tends to wait for more evidence of continued inflationary pressures before proceeding. Carry on their ideas.
Huw Pill, chief economist at the Bank of England, said that new evidence about the end of the Covid-19 vacation program shows that “the vast majority of people have returned to work”.
Bailey reiterated that the development of the labor market will be the most important factor in his vote. “The labor market looks tight, and this is the big problem right now,” he said.
He added that he will look at the October employment data in the labor market data released by the National Bureau of Statistics on Tuesday, as well as broader evidence of the MPC’s labor market leave ending in December released before the next meeting.
Bailey began to address members of Congress, saying: “I am very disturbed by the inflation situation,” and added that “inflation is higher than the target is not what we want.”
The governor did not apologize for believing that the major financial markets would raise interest rates at the November meeting, and said he wanted to refute the impression that the central bank will always choose to support economic activity rather than control inflation. “We are in the business of price stabilization,” he added.
The two members of the external monetary policy committee who provided evidence to the committee had very different views on the outlook for inflation.
Catherine Mann has repeatedly intervened, emphasizing the risks of future economic weakness.
She cited the “weakness of the company’s potential pricing power” and said that the cancellation of government support for the company next year and the reduction in the prospects for business investment from the scars of the coronavirus are the reasons why inflation may fall faster than expected. But she added that if the Bank of England’s forecast proves to be accurate, she believes that interest rates may still need to rise in the coming months.
Michael Sanders, who voted for an interest rate hike at the November meeting, said that the current spiral of wage prices is unlikely, but evidence of tight labor markets, skills shortages and rising wage growth leads him to believe that the central bank should “start withdrawing now.” We have implemented some stimulus measures in the past year or two.”