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Haskel's analysis continues to point to higher-for-longer

BOE
  • Some other interesting points from Haskel: His model estimates that working through labour market tightness and food/energy/shortage chocks up to Q4-19 (i.e. Ignoring the panemic and the Ukraine war), UK inflation would have been around 4% by late 2022/early 2023.
  • The model also looks at the "catch-up" effect of wage setting - I.e. If inflation was higher-than-expected how workers respond to wage negotiations. He points out that although this has little long-term implications the longer inflation stays above target the more second-round implications there are.
  • It's also notable that his estimate of labour market tightness is using the V/U ratio - something the Bank has used in a lot of its analysis but probably not to the extent used in this paper.
  • Overall, it seems to be another piece of communication from MPC members pushing back against any cuts any time soon. All of this analysis points very much to higher-for-longer.
  • That's been the message that Haskel (and the wider MPC) have been conveying recently anyway so there's been little market reaction to the release of the speech.
  • He will deliver the speech at 17:00GMT at Warwick University and will take Q&A after (which may well be after the market close).
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