- There may be precautionary saving
- Households inflation expectations are at the very top of what we can explain
- Today’s wage data is good news as a bit lower than expected
- Wage settlements data for next year from surveys is higher than we would like to see
- There are uncertainties around the domestic economy
- I am worried about inflation persistence in UK, means monetary policy needs to be more restrictive than otherwise
- I’m not convinced monetary policy is meaningfully restrictive in the UK
- Latest unemployment reading is not great, but problems with labour force survey make it hard to know what’s going on
- Latest wage data suggest disinflationary process in on track, forward-looking surveys suggest it might not be
- Wages are still way too high given weak growth
BoE’s Greene has held a hawkish stance for months, so these comments are not surprising. In fact, this is pretty much what we saw in the Minutes of last week’s BoE Monetary Policy Summary that you can find here.
Greene is concerned that higher inflation expectations changed wage setting behaviour, so even if the labour market softens, it might not be enough to bring inflation back to 2% target. Kind of what happened in the 70s when the
This article was written by Giuseppe Dellamotta at investinglive.com.