Bank of England Deputy Governor Clare Lombardelli said the conditions for persistent inflation in Britain are crystallising. She signalled she was likely to back another rate rise after last week's increase, and did not rule out a move in December or February.
Bank of England Deputy Governor Clare Lombardelli said on Tuesday that the conditions for persistent inflation in Britain are crystallising. She signalled she was likely to back another interest rate rise after last week's increase.
Lombardelli keeps December and February open
Lombardelli voted as part of the 8-1 majority that raised rates to 4% from 3.75% last week. In her speech, she said that without evidence of weaker inflation pressures, she continues to think there is likely to be a case for a further increase in rates in the near term.
Asked about her voting intentions for the coming MPC meetings, Lombardelli said: "I wouldn’t rule December in or out, February in or out". She said her vote would be affected by developments around the conflict in the Middle East, as well as price and labour market data.
Lombardelli also said the BoE does not see a de-anchoring of longer term public inflation expectations taking place.
Labour market weakness may blunt the inflation effect
The bulk of her speech focused on Britain's labour market, which she said had reduced rates of both hiring and job turnover. She said there was a risk that a given increase in unemployment would put less downward pressure on inflation than before, due to an increased mismatch between workers' skills and employers' needs.
The problem seemed particularly acute for younger workers aged 18-24, whose unemployment rate had risen more compared to other workers than had been the case elsewhere in Europe.
Source: Reuters via Investing.com
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