Head of Bank of England Economist Huw Pill said on Friday that the expected increase in inflation this year might not cause a second round price pressure, but a strong salary growth recently was a reason to “be careful” front.
Pill said he was surprised by the data that had shown a 6% increase in the private sector wages, not including bonuses, in three months until November, describing the number as “slightly distorted”.
Other steps also seem to have been flat at a higher level than that consistently with inflation back to the 2%target, he said.
“I think it is a reason to be careful, because of the death of the way we continue by eliminating limiting monetary policy and cutting bank interest rates,” he told Bisnis, the day after Boe cut the key level to 4.5% of 4.75 %.
The pill was chosen with most of the monetary policy committee to cut tariffs with a quarter point, but two members chose to reduce half points.
Pill says the underlying domestic price pressure moves in the right direction:
“In all MPC membership, the story is one of the ongoing disinforcement, interest rates can go down. The problem is how far and how fast. “
The central bank on Thursday reduced its estimated growth for this year to 0.75% and the estimated inflation will increase to around 3.7% in the third quarter, not returning to the target of 2% until the end of 2027.
Pills describe this as a “blip” driven by factors once and less likely to cause persistent inflation because the labor market is less tight than when the last price begins to accelerate at the end of 2021.
“Blip may not have a second round effect … but there is a risk on both parties and that is something we must remain vigilant,” he said.
Boe Governor Andrew Bailey said he hoped to cut further tariffs, but banks would take a “gradual and careful” approach.
The Minutes of the February policy decisions show that some policy makers who support a quarter-points of interest rates think that the central bank must be careful about further levels of cutting because the higher inflation risk can be sticky.
Source: Reuters
