Bank of England officials warned that Britain’s job boom brings inflation risks
A senior official of the Bank of England said on Monday that the prosperous British labor market poses a major risk to future inflation paths, even if the current surge in global commodity prices may weaken.
Ben Broadbent, the deputy governor of the Bank of England, did not make it clear when the central bank’s monetary policy committee met this month whether he would prefer to vote for a rate hike.
Other MPC members recently emphasized The risk of continued inflation But it also did not provide any clear indication of when they will vote to tighten monetary policy.
Economists expect that most members of the Monetary Policy Committee will decide to maintain interest rates at a historic low of 0.1% on December 16, waiting to assess the impact of the new Omicron coronavirus variant.
Broadbent told the audience in Leeds that the Bank of England is facing a “extremely challenging period of monetary policy.” Despite the two years of global and British economic weakness, inflation will still climb to the “north side” of the central bank’s 2% target. Economic Growth.
As inflation reached its highest level in nearly a decade, the UK consumer price index rose 4.2% in October from the same period last year.
Broadbent said that the Bank of England could not take any measures to protect British households from the continued increase in the cost of living, because this was driven by the surge in global demand for goods and the disruption of the supply chain caused by the blockade of Asian countries to crack down on production.
He added that although some changes in expenditures related to the new work-at-home habits now seem likely to continue, by the time any changes in monetary policy take effect, the pricing pressures on traded goods are “more likely to subside rather than intensify”.
But Broadbent made tougher comments on the inflation risks brought about by unexpected tensions in the UK labor market. Even after the government’s vacation plan ended, the unemployment rate was only slightly higher than the level before the pandemic. , Vacancies are still at a record level.
He said that higher public sector employment may be part of the reason. Even if some of these are temporary recruitments, government spending plans indicate that long-term recruitment in the public sector will continue.
Broadbent said that some of the pressure in the labor market may be due to “recruiting too fast,” in which case they will ease over time.
But if workers ask for wage increases to offset the rising cost of living, then “the current high inflation also poses an upside risk to wage costs.”
Broadbent said that temporary increases in the cost of imported goods rarely have much impact on monetary policy, because the shock usually passes before changes in interest rates take effect.
But he added that “the tight labor market may have a greater risk of future inflation”.