BoE needs more clarity on UK labour market, says official

The Bank of England (BoE) needs more clarity on how the UK labour market is performing before it can consider cutting interest rates, according to Deputy Governor Ben Broadbent.
Broadbent also warned that sticky wages may force the central bank to keep rates elevated to drive out domestic inflation by forcing the economy into “a longer period of below-trend growth.”
Uncertainty about the accuracy of official jobs and wage data “means the Monetary Policy Committee would probably want to see more evidence, across several indicators, before concluding things are on a clear downward trend,” Broadbent said in a speech at the London Business School on Monday.
“The reaction of policy is likely to be somewhat more delayed than in a world of perfect and complete information.” Jobs figures from the Office for National Statistics are being re-examined after a collapse in response rates to its key Labour Force Survey. Measures of official wage growth have also detached from private surveys and are adding to the confusion, Broadbent said.
He added: “To the extent the tight labour market is the cause of strong domestic inflation, then the economy would need a longer period of below-trend growth – possibly with corresponding consequences for monetary policy – to bring it back into a more sustainable position.”
His comments come amid mounting pressure for the BoE to cut rates next year amid signs that the economy is slowing and inflation is coming under control.
Markets expect four quarter-point reductions between May and December, taking rates from 5.25% to 4.25%, with the possibility of a fifth. BoE officials including the Governor Andrew Bailey have pushed back against such a steep fall.
Headline UK consumer price inflation has dropped from double digits at the start of the year to 4.6% but the BoE remains concerned about underlying domestic prices. It is keeping a close eye on wages and services inflation.
Regular wage growth is running at 7.3%, double the level sustainable with the BoE’s 2% inflation target. Services inflation at 6.6% is higher than it was at the start of the year.