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-BOE Haldane: His Vote For A Hike Not Radical Or Surprising; Pay Pressures
By David Robinson
LONDON (MNI) - Bank Of England Chief Economist Andrew Haldane said that pay
pressures in the UK were gradually mounting, that monetary policy remained
exceptionally accommodative and that in these circumstances his vote for a 25
basis point rate hike at the June meeting was neither radical nor surprising.
Haldane, speaking at the Academy of Social Sciences, cited a mix of data
and anecdote suggesting that pay growth is picking-up and he said tightening
monetary policy now would help avoid hiking Bank Rate more rapidly at a later
In June, of the nine Monetary Policy Committee (MPC) members Haldane and
two colleagues, Ian McCafferty and Michael Saunders, voted to hike Bank Rate.
"I voted to raise Bank Rate by 25 basis points. The aim in doing so was
exactly in line with the May Inflation Report - to reduce modestly the degree of
monetary policy accommodation, given a tight labour market and gradually
mounting pay pressures, to return inflation to target sustainably," Haldane
A decade after Bank Rate was first put on an emergency setting, following
the global financial crisis, backing a 25bps hike "is hardly either surprising
or radical," he said.
"A Bank Rate rise of 25 basis points would still leave monetary conditions
in the UK extraordinarily accommodative by any historical metric. And the aim in
doing so is to lower the risk of needing to tighten policy less gradually in
future and cause a sharper adjustment in the economy," he added.
His comments made clear he is almost sure to back a hike at the August
"We have seen a steady pick-up in annual rates of wage inflation over the
past 18 months, as well as in pay settlements. Private sector regular pay growth
has risen from around 2% this time last year to just shy of 3% currently. And
average pay settlements of around 2% last year have picked up to around 2.5%
this," he said.
In addition public sector pay in some areas, most notably in the health
service, is picking up and Haldane said employers had told him that they were
more likely to increase pay for existing staff as well, as they had been doing
previously, to attract new recruits.
He downplayed the slowdown in the first quarter and said that growth was
running around its new, lower trend rate of 1.5% annualised.
--MNI London Bureau; tel: +44 203-586-2223; email: email@example.com