BOE's Lombardelli on Rate Cut, Labor Market, Inflation
We've had the decision from the MPC to keep interest rates unchanged by a margin of 6 to 3, a bit closer than some had expected. Just take us through the thinking there. So we decided to hold rates at 4.25%. Today, we have been able to cut rates four times over the last year. But given the uncertainty facing the economy, we decided to hold at this event. And one of those uncertainties, of course, are the unfolding events in the Middle East and the impact that could have on the oil price. At what point would that become a concern to you? And have there been conversations with the government, for example, on the unfolding crisis and what it could mean? So the events in the Middle East are tragic and they are deeply worrying. As you would expect, we are monitoring carefully those events and the impact that those will have. We've seen oil prices, for example, increase since the attacks. But we are thinking about and focused on the impact for UK inflation. And so we're monitoring and carefully assessing those events. And has there been any conversations with government in terms of thinking about the impacts that could be in the actions that might need to be taken? There's been no specific conversations about the impacts for monetary stability or financial stability. I mean, you've had a lot to consider at this meeting. And one of the things that is front and center in the in the government's quote as well is the changes in the labour market. And when we look at your agents survey, some of them are quite explicit about how this links to policy changes in the government, national Insurance exchange, etc.. To your mind, what's behind the current weakening of the labour market, the slowing of wage growth? How much of it is down to things like National Insurance and National Living Wage? And how does that tell you with your expectations? So we are seeing some poor weakening in the labour market. I mean, this is in line with what we expected and actually quite similar to what we set out in our latest monetary policy report in May. But it is important that we consider those changes. We factor them in. The questions for us all, to what extent that weakening in the labour market will feed through into the prices that people are paying. And there seems to be less pass through in terms of prices, but more of a burden going on to wage growth is like that. There's lots of factors that are changing in the labour market. We are seeing some pass through to prices, we are seeing some pass through to wages. We're also seeing some adjustment of margins and some changes to employment intentions. So you take those together and we're monitoring that carefully. And as you say, our agents around the country talking to a lot of businesses about how they are responding to all the changes that they're seeing in prices across across their businesses. And it's quite an issue. We've got quite weak growth outlook built in to your forecast. And it sounds like more you're saying the underlying pattern is still pretty stagnant. Yeah, we've got growth returning and increasing next year and beyond. So we do see sort of growth increasing, but it is at low, low rates relative to historical standards. Now, six weeks is a long time. A lot can change. But as things stand at the moment, markets are expecting you to cut interest rates come August. Does that seem like a likely scenario? We will decide interest rates in August, in six weeks time. I'm not going to predict what it is we're going to do. We have said that we expect interest rates to be on a gradually downward path in general. But of course we need to be careful and think about all of the factors playing in. I mean, inflation is still too high and that is painful for people. And services, inflation particular points for them. Yet we've seen a rise in the number of elements of inflation. Actually, you're right, services inflation is proving to be quite sticky. But we've also seen recent rises in energy prices, other regulated prices like transport, like phones and of course food prices have risen as well. And all of that, taken together, is obviously difficult for people.
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