MNI BRIEF: UK Labour Market Still Very Tight - BOE Bailey

The UK currently has "a very tight labour market" and that policymakers had been taken by surprise by the scale and persistence of the decline in the participation rate, Bank of England Governor Andrew Bailey said Monday.

Giving evidence to the Treasury Select Committee, Bailey said that the MPC is no longer forecasting a rebound in participation, which it now projects will hold steady at 63%, in part because of the surge in reported long-term sickness.

Deputy Governor Dave Ramsden said that even if the Bank had tightened policy earlier, it would have had only a marginal effect as 80% of the inflation overshoot was due to energy and traded goods price shocks. The Monetary Policy Committee was split between those backing a 50 and a 25 bps hike at its May meeting, with MPC member Jonathan Haskel telling the TSC he had backed a 50 bps hike because of high vacancies and weak labour supply.