— “Economy not fully recovered,” says MPC member Jonathan Haskel
By Laurie Laird
LONDON (MaceNews) — The UK economic recovery is not sufficiently robust to warrant tighter monetary policy, according to rate setter Jonathan Haskel, placing him at odds with two colleagues who last week advocated for a rethink of extreme monetary accommodation.
“My preference at the moment is to not move to tightening until the recovery is more fully established,” said Haskel, addressing an online event sponsored by Liverpool University. “For the foreseeable future … tight policy isn’t the right policy.”
Haskel’s comments contrast with the more hawkish tone struck by his colleagues on the Bank’s Monetary Policy Committee over recent days. Last week, external member Michael Saunders raised the question of “curtailing asset purchases,” arguing that the Bank’s conditions for considering tighter policy have been met.
Saunders has long been considered one of the more dovish members of the MPC, advocating sub-zero interest rates as recently as February. Fellow MPC official Dave Ramsden also adopted a hawkish tone last week, putting “more weight on my inflationary rather than disinflationary scenario.” Ramsden believes that inflation could stretch toward an annual rate of 4% next year, much higher than the Bank’s current forecasts.
The Bank of England meets early next month, with a policy decision and updated forecasts scheduled for release on 5 August. Consumer price inflation rose to a near-three-year high of 2.5% in June. Economists are also eyeing a sharp increase in wage growth, with average earnings surging to an annual pace of 7.3% in the three months to May. However, national statisticians attribute much of that increase to Covid-related anomalies and estimate underlying wage growth at between 3.2% and 4.4%.
BoE watchers will keenly monitor an upcoming speech by MPC member Ben Broadbent on Thursday at 0830 GMT for further clues about the direction of policy ahead of the next rate-setting meeting. Public sector finance and retail sales data are also due this week, but are not regarded as numbers likely to significantly affect the MPC’s thinking on policy.