A former member of the Bank of England’s Monetary Policy Committee says its credibility will be further undermined if it puts off another rate riseby Andrew Sentance / May 9, 2018 / Leave a comment
The Bank of England Monetary Policy Committee (MPC) will consider tomorrow at its May meeting whether to raise the official UK Bank Rate to over 0.5 per cent for the first time since March 2009. The short-term indicators on growth and inflation present a mixed picture. GDP rose by just 0.1 percent in the first quarter of this year, though economic activity was quite significantly affected by wintry weather—hitting both construction output and retail sales. CPI inflation has fallen back to 2.5 percent, a slightly bigger short-term drop than the Bank of England was expecting.
Labour market indicators, however, continue to be positive. The unemployment rate has fallen to 4.2 percent—the lowest rate recorded since the mid-1970s. The number of unfilled job vacancies has hit a new high, with one vacant job for every 1.7 unemployed people, down from a ratio of 2.3 just two years ago. Pay growth has picked up to 2.8 per cent, which compares to an average rate of wage increases of 1.8 percent since the recovery started in mid-2009.