Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Weak pay suggests UK can grow without pushing up inflation - BoE's Ramsden

Published 20/11/2017, 18:34
Updated 20/11/2017, 18:40
© Reuters. Workers are seen in an office tower in the Canary Wharf financial district at dusk in London

© Reuters. Workers are seen in an office tower in the Canary Wharf financial district at dusk in London

LONDON (Reuters) - Brexit uncertainty may have made British workers more cautious about their pay demands, which suggests that the economy has more room to grow without pushing up inflation, a top Bank of England official said on Monday.

Deputy Governor Dave Ramsden, who voted against the decision this month by the BoE to raise interest rates for the first time in 10 years, said he had a "somewhat different" view of the economy to most of his colleagues.

While the Monetary Policy Committee overall judged that slack in Britain's economy was now disappearing, Ramsden said there were signs - such as persistently weak wage growth - that there may be more left to use up.

"I attach some weight to the idea that workers have responded to the changing outlook by showing greater flexibility in their wage demands," Ramsden said in his first speech as a BoE official which was due to be delivered at a Strand Group event at King's College, London.

He added that this would help explain why measures of domestically generated inflation pressure mostly remain muted.

"If true it would mean there is a little more room than headline measures of slack suggest for the economy to grow without generating above-target inflation in the medium term," Ramsden said.

Most of the BoE's policymakers expect the steep fall in Britain's unemployment rate will soon start to push up wages more strongly.

But evidence for a marked pick-up in wage growth remains scant, with households squeezed additionally by the post-Brexit vote rise in inflation.

Last week another BoE deputy governor, Ben Broadbent, said the central bank needed to stick with its assumption that lower unemployment will generate faster inflation, describing spare capacity in the economy as "dwindling".

Ramsden - who was the top economic advisor to Britain's finance ministry before joining the BoE - said on Monday the biggest risk to the outlook for Britain's economy was uncertainty about its trading relationships after Brexit, as well as the path followed to reach them.

© Reuters. Workers are seen in an office tower in the Canary Wharf financial district at dusk in London

BoE Governor Mark Carney has previously described the outcome of Brexit talks as probably the biggest factor driving moves in interest rates from now.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.