Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

BoE's Broadbent sees inflation above 5%, price pressure from jobs market

EconomyDec 06, 2021 13:15
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: Bank of England Deputy Governor Ben Broadbent attends a Bank of England news conference, in the City of London, Britain November 1, 2018. Kirsty O'Connor/Pool via REUTERS

By David Milliken and William Schomberg

LONDON (Reuters) -Bank of England Deputy Governor Ben Broadbent said on Monday that inflation in Britain might "comfortably exceed" 5% in April and that the country's tight labour market risked becoming a more persistent source of inflation.

The BoE, which is trying to steer the economy through its recovery from a pandemic slump, said last month that inflation would hit about 5% in the second quarter of 2022 before falling.

Speaking to Leeds University Business School, Broadbent suggested that forecast would probably have to be raised further above the central bank's 2% target.

"The aggregate rate of inflation is likely to rise further over the next few months and the chances are that it will comfortably exceed 5% when the Ofgem (regulator) cap on retail energy prices is next adjusted in April," Broadbent said.

Asked about the Omicron variant of COVID-19 and how it would affect his vote on interest rates next week, Broadbent said he had not decided how he would vote, and that his decision would not be driven by a single factor.

There were reasons to think the recent jump in inflation for goods, which has been aggravated by a global supply chain squeeze, was likely to fade - and in some cases, reverse - before a BoE rate rise would have time to have an impact.

"It's more likely than not - looking a couple of years ahead as we should - that these pressures on traded goods prices are more likely to subside than intensify," Broadbent said.

Although unemployment is higher than before the pandemic, the jobs market could still prove a source of inflation, especially as the end of the furlough programme in September did not appear to have made hiring easier for employers.

Broadbent said it was unclear if record job vacancies reflected "sand in the wheels" of the economy as employers ramped up staffing levels, or if there was a longer-term mismatch in skills that would push up inflation.

He said he did not believe the coronavirus pandemic would lead to a lasting drop in labour force participation, as falls in rates so far had been similar to other downturns.

Sterling edged up and British government prices fell slightly after the comments by Broadbent.

He was one of the seven members of the BoE's nine-strong Monetary Policy Committee who voted to keep interest rates on hold last month - a decision that shocked financial markets which had been betting on a hike.

Investors are now pricing in a 50% chance of the BoE raising rates from 0.1% to 0.25% on Dec. 16 because of the recent emergence of the Omicron variant.

On Friday, Michael Saunders, one of the two MPC members who voted for a rate hike last month, said there might be a case for waiting for more information about Omicron's impact before pressing ahead with rate hikes.

Broadbent used his speech on Monday to stress how moves such as a change to interest rates could take two years to have an effect on the economy.

"What we can do - and what is the best possible approach - is to think at every meeting about the level of interest rates that will maximise our chances, a couple of years from now, of hitting the inflation target exactly," he said.

BoE's Broadbent sees inflation above 5%, price pressure from jobs market

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
David Hawley
David Hawley Dec 06, 2021 13:13
Saved. See Saved Items.
This comment has already been saved in your Saved Items
So if raising interest rates will take 2 years to feed through into the UK economy, what is the point of raising them? its not the lack of tools that the BOE has at its disposal to tackle inflation...its the lack of imagination.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
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.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email