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By David Robinson
LONDON (MNI) - the latest UK data support the Bank of England Monetary
Policy Committee's view that the slowdown in the first quarter was temporary and
that the signs are that growth is set to exceed its "speed limit", Dave Ramsden,
the Deputy Governor, Market and Banking said Thursday.
Speaking at a Barclays event Ramsden said that the labour market remained
robust and that the MPC's central view that domestic inflation pressure would
mount appeared to be right. The MPC did not hike Bank Rate in May, deciding to
wait-and-see if the Q1 slowdown was ephemeral and Ramsden is clear that it
appears to have been.
"My central expectation for the economy is in line with the MPC's best
collective judgement as expressed in our inflation report forecasts. Global
growth still looks solid, albeit a bit less rosy than it did before. The labour
market is still robust. I expect GDP growth to resume at a steady but
unspectacular pace," Ramsden said.
The MPC has cut its estimate of potential growth, the speed limit of the
economy, to around 1.5% a year so even modest growth by historic standards, of
around 0.4% quarter, would be enough to squeeze whatever slack is left.
"We expect wage growth and domestic inflationary pressures to continue the
pickup we saw at the end of last year," Ramsden said.
He pointed out that the MPC's May forecast based on unchanged policy showed
inflation stuck above the 2% target, which he said was an undesirable outcome.
One note of caution injected by Ramsden was that he saw risks in both
directions to the MPC's central scenario.
Productivity growth could disappoint and consumption growth "might take
another leg down as households continue to adjust to lower real incomes,"
pushing down on growth and inflation.
Ramsden, who was previously a senior ranking Treasury official, has voted
for unchanged policy at every Monetary Policy Committee (MPC) meeting he has
attended. His first meeting was in September 2017.
He voted against the November 25bps rate hike which lifted Bank Rate to
0.5% but then subsequently voted to maintain the rate at that level.
Ramsden's opposition to the November hike was his belief that earnings
growth may not accelerate as rapidly as the majority on the MPC believed,
because workers were responding to heightened economic uncertainty "by showing
greater flexibility in their wage demands."
In his Barclays speech, however, he sounded more confident that wage growth
--MNI London Bureau; tel: +44 203-586-2223; email: email@example.com