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Potential rate hike from “emergency level” is not a bug, but a feature


Remarks by BOE politician Jonathan Haskel

  • Very low interest rates are unusual, a response to the pandemic
  • A gradual increase in rates would be a return to normal
  • It would show that the UK economy is making a comeback
  • Expect a large change in inflation to be transient
  • Latest data points to tight labor market, putting upward pressure on wages
  • But inflation due to higher wages must go hand in hand with productivity
  • The BOE must therefore be vigilant on this subject.

The main remark tries to justify any rate hikes at this point as not being an anomaly but part of a consequence resulting from the pandemic.

In this case, he associates it with supply problems leading to increased inflationary pressures.

I mean he’s not technically wrong, but again rate hikes aren’t exactly the right tool to get to the root of the problem. As BOE Governor Bailey pointed out in September, monetary policy cannot produce computer chips or wind.

As you might expect, Haskel’s other remarks don’t reveal much until the December political meeting.

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