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Broadbent's speech points to high bar to cuts; but does note AWE still important

BOE
  • The overarching message of Broadbent's speech is consistent with other recent MPC communication - that even if things appear to be improving, there is a high bar in order to act and loosen policy.
  • However, it is worth noting as well that he notes that despite looking at a wide data set, it is still AWE that the BOE pays most attention to for wages.
  • "I should be clear that the MPC still puts most weight on the AWE series. And it’s evident from all of them that pay growth – and with it other indicators of domestic inflation like the services component of the CPI – has been significantly faster than the sorts of rates that, over time, one might think of as consistent with the 2% inflation target."
  • "But, taking all this together, there is a question about whether rapid pick-up in wage growth in the spring and summer was quite as marked as in the official data. AWE growth has been particularly volatile in the past year or so and other indicators of wage growth haven’t been quite as strong."
  • "By the same token, of course, the noisiness of these measures, and the discrepancies between them must also inject a degree of caution about the more recent decline. One would want to see further evidence, across several indicators, before concluding things are on a clear downward trend."
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