New Bank of England Deputy Governor Dave Ramsden said on Tuesday he was in no hurry to vote for an interest rate hike because he saw little sign of inflation pressure building in Britain’s labour market.
“Measures of domestically generated inflation are consistent with there still being some slack in the economy,” Ramsden said in a series of written answers submitted to a committee of lawmakers in Britain’s parliament.
“They generally remain a little below levels consistent with the 2 percent target. Despite continued robust growth in employment there is no sign of second-round effects onto wages from higher recent inflation.”
The BoE surprised investors last month when it said most of its rate-setters expected to increase borrowing costs “in the coming months”, even though Britain’s economy is growing more slowly than other European economies and uncertainties about Brexit are mounting.
But Ramsden said he was not part of the majority, which included BoE Governor Mark Carney. Financial markets have betted on a first hike as soon as Nov. 2, at the end of the BoE’s next policy meeting.
The BoE believes that Britain’s departure from the European Union will mean the economy will not be able to grow as quickly as before without generating excessive inflation because of lower migration and weaker investment by companies.
Britain’s inflation rate hit 3 percent in September, above the BoE’s 2 percent target, data published on Tuesday showed. But much of the increase has been caused by the fall in the value of the pound since last year’s Brexit vote which is likely to be a temporary driver of price increases.
Carney and another new member of the BoE’s Monetary Policy Committee, Silvana Tenreyro, were also due to speak to the Treasury Committee in parliament later on Tuesday.
Ramsden, who was formerly the top economic adviser to Britain’s finance ministry, said in his written answers to the lawmakers that there were signs that uncertainty about Brexit was weighing on companies and business investment could turn out to be weaker than the BoE’s central forecast.
“I see a real risk that as a result of the process of Brexit and the evolving uncertainties around it, business investment could turn out weaker than in the central forecast,” he said.
“If this were to happen then business investment growth would not necessarily compensate for sluggish consumption growth over the forecast.”
Source: Reuters (Writing by William Schomberg; Editing by Michael Holden)