Interest rate reductions in the United Kingdom depend on the slowdown in wage growth, says Andrew Bailey
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Other British interest rate drops will spend if wage growth will slow down as planned during the year, in the context of global economic uncertainty, officials of the Bank of England announced on Tuesday.
Andrew Bailey, Governor of the BOE, said that he had voted to reduce the reference rate by a quarter to 4.25% last month, mainly because the labor market had relaxed and companies expected to make lower remuneration awards – with a turmoil in global trade policy, then the inclination of his point of view on a reduction.
“We have an opinion which is that we will see the remuneration drop this year,” he told the selective committee of the Treasury of the House of Commons.
“It will be a crucial judgment in the future, which is why” gradually and cautious “remains my guide line,” added Bailey, referring to the wording of the monetary policy committee on its position last month.
Sarah Breeden, a BOE sub-government, told deputies that she had seen enough evidence of the weakening of the job market to justify her vote for a drop in rate, even before taking into account the turbulence caused by Donald Trump’s prices.
But Catherine Mann – who voted to leave rates pending at 4.5% – said she was concerned about the recent volatility on the financial markets and by an environment in which more volatile inflation could influence behavior.
If inflation – which reached a 15 -month summit of 3.5% in April – exceeded 4% due to global factors in the short term, for example, it was “a threshold that could change consumer attitudes,” said Mann.
The drop in the Boe interest rate last month has marked the fourth reduction since last summer, bringing the cost of the loan to its lowest level since 2023.
But the decision – made as the American president launched his “liberation day” of the assault of prices – also revealed a split to three.
Led by Bailey, a majority of five MPC members supported the Cup, while two favored a greater and a half -point reduction and two – the chief economist Huw Pill – did not want the rates to change.
Bailey said that in addition to an intense uncertainty about the twists of global trade policies, the impact of inflation prices has remained ambiguous: the blow to global growth would weigh on prices, but that the disturbance of rotten channels could have the opposite effect.
For the United Kingdom, the commercial agreement agreed that the United States could alleviate immediate effects, but “always leaves the average rate level higher than before everything that has started,” said Bailey. “What affects our economy is always what the rest of the world does.”
British trade agreements with the EU and India would have longer -term advantages, however, said Bailey and other MPC members.
Swati Dhingra, an external member of the MPC who voted for a drop in rate of 0.5 points last month, said that post-Brexit trade barriers meant that the British economy had both entered and leaving the pandemic in a much lower position than its peers, with its share of the world trade in services “even if we are such superpowered services”.
Commercial transactions could “stem the tide” and pay in the future, said Dhingra.
