Mark Carney’s focus on weak wages to keep record-low borrowing costs is up against one key foe: the strongest economic growth in the Group of Seven.
Minutes of the Monetary Policy Committee’s July meeting this week will show how the nine members voted when they kept the key interest rate on hold and where the fault lines in their thinking lie. Last month, some said the threat to the recovery from an increase had diminished as growth becomes “more established.”
In the year since he introduced his forward-guidance policy, Carney has shifted the focus from the unemployment rate to spare capacity and now to wages as evidence that the economy can continue to grow without fueling inflation. While the governor said last week the MPC has a “wide range of views” on the level of slack in the economy, indicating it isn’t unified in its analysis, continued pressure on the recovery from a stagnant euro area and geopolitical risks may defer tightening.
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