BOE Deputy Governor Says She Will Not Vote for Rate Hike Until Wages Have Recovered

The Bank of England deputy governor, Minouche Shafik, has said she will not vote for an interest rate rise until she is convinced wage growth has recovered.

In the latest sign from policymakers that borrowing costs will remain on hold well into 2016, Shafik noted signs that the rate of earnings growth in the UK had “levelled off” recently and that other factors were also keeping inflation low, such as the strong pound and a drop in commodity prices.

Her comments echoed the minutes of last week’s monetary policy meeting when the Bank left interest rates at 0.5%, citing another fall in oil prices and that pay growth had “flattened off”. Rates have been at a record low since the depths of the financial crisis in 2009.

Shafik said in a speech to the Institute of Directors: “The most likely outcome is that wage growth will soon resume its recovery, but there are alternative states of the world in which it takes longer for that to happen. So I judge it prudent to tread carefully, and refrain from voting for an increase in bank rate until I am convinced that wage growth will be sustained at a level consistent with inflation returning to target.”

The comments come as financial markets prepare for the Bank’s US counterpart, the Federal Reserve, to raise interest rates for the first time in almost a decade. Bank of England policymakers have repeatedly sought to play down market expectations that they will take cues from the Fed in setting UK policy.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza