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Lombardelli on UK labour market and inflation

BOE
  • Labour market: "Overall unemployment is expected to rise as the impacts of tighter monetary and financial conditions keep feeding through the economy, but these increases should not be large, and the labour market is expected to remain relatively strong by international and historical standards. However, there are particularly high levels of uncertainty around what is happening in the UK labour market. There appear to have been sizeable structural shifts in labour supply since the pandemic and there are particular challenges around the availability and reliability of UK labour market data due to the substantial problems with the Labour Force Survey."
  • Inflation: "On the one hand inflation, especially services inflation, may prove to be more persistent than expected. This could be the case if firms are confident of their ability to raise prices and labour markets remain relatively tight. In this case the monetary tightening to date may have less effect on bringing down inflation than expected.On the other hand, it is uncertain how much of the impact of the monetary tightening has fed through to the economy, for example as mortgage holders roll off previously low fixed ratemortgages. As inflation falls the policy rate will be more restrictive in real terms and so the impact of monetary tightening on demand may prove to be greater. Navigating policy through this uncertainty is the key challenge for bringing inflation back to target sustainably and for growth in the near term."
  • Note that Lombardelli has also recused herself from having any UK discussions or input in the OECD's UK forecasts for the upcoming May forecast update.
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