MNI BRIEF: Labour Force Participation Rates Key - BOE's Bailey

The shrinking UK labour force, which could create second round inflation effects, was a key focus for policymakers, according to Bank of England Governor Andrew Bailey. Unemployment had not picked up after the closure and re-opening of the UK economy but "the story is much more about participation than unemployment," with the size of the labour force declining, and uncertainty over whether older workers will ever return to the labour market, he said.

Bailey, speaking at the SUERF Colloquium, said that the Bank's job was to get inflation back to target when internal and external shocks "risk leading to persistence in domestic wage and price setting, so-called second round effects."

In other remarks, he expressed skepticism about the sticking to any forward guidance at present. ""We are in a world of unusually high uncertain ..We have to pretty careful about how we can use forward guidance," he said, adding that the Bank had to tread a fine line between the risks of recession and enduring inflation.