According to BOE deputy governor Minouche Shafik, the UK central bank will need more evidence of price pressures and slack in the labor market before considering raising interest rates.

In an interview given on Monday to the UK financial daily, the Financial Times, the deputy governor said that, “If you look at what we would expect to see at this point in the recovery, the increases in wages that we have seen have not been significant”.

Shafik also dismissed indications of future wage pressures in recent surveys, saying that they “haven’t manifested themselves” in real economic data, setting a high bar for the central bank to raise interest rates from their current level of 0.50%.

Shafik told the Times, “We would need to see more of the data pointing in the same direction in terms of price pressures – particularly in terms of wages and unit labour costs. In terms of sustained domestic inflationary pressures, that’s going to be the ultimate test”.

The deputy governor’s position on raising rates contrasts with the two MPC members that have recently been dissenting voting for an interest rate hike of 25 bps, Ian McCafferty and Martin Weale. The two MPC members have been voting in favor of an interest rate hike since the BOE’s August meeting.

Authored by

Bank of England

Comment Here!