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MNI BRIEF: BOE Broadbent - Labour Market Poses Inflation Risk

MNI (London)
(MNI) London

BOE Deputy Governor sees upside price risks from labour market, not goods.

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The tight UK labour market, rather than currently elevated goods prices, poses a more enduring upside risk to the BOE achieving its inflation target, Bank of England Deputy Governor Ben Broadbent warned Monday.

Broadbent said that while inflation was set to rise to around 5% in the spring there was nothing the BOE could do about this but high vacancies, a shortage of labour supply and the risk of employees inflation expectations rising posed a more durable threat.

There is "an upside risk to wage costs from currently high inflation. If wage earners’ expectations of future inflation rise in response, of if they seek compensation for the rises in the costs of living that have already occurred, wages could also accelerate further," he said. Broadbent's remarks, supporting the case for tightening, made only one brief reference to the new omicron Covid variant, setting out the policy outlook absent its potential effects.