BOE’s Broadbent says not ready to hike rates

Bloomberg

Bank of England (BOE) Deputy Governor Ben Broadbent said he’s not ready to vote for higher interest rates, even though
he sees pressures to do so
building up.
“There is reason to see the committee moving in that direction, but there are still a lot of imponderables,” Broadbent said in an interview with The Press and Journal. “It is a bit tricky at the moment to make a decision.”
Ten years to the month since Britain last raised borrowing costs, the BOE faces a diverging economy. Inflation is above target, in part because of the pound’s slump since the nation voted to leave the European Union, but growth is struggling because of uncertainty over what Brexit will look like. The Monetary Policy Committee voted last month 5-3 to keep rates on hold.
The MPC’s next decision will be on Aug. 3, when it will also publish new economic forecasts. Broadbent’s comments are one of the last remaining puzzle pieces as to where committee members stand on whether to withdraw some of the stimulus introduced in the wake of the Brexit vote last year.
Michael Saunders and Ian McCafferty, who were among the three officials to vote for a rate rise at the last meeting, have since made their cases for why policy should be tightened. The third, former policy maker Kristin Forbes, was known for dissenting in favor of higher rates but has been replaced by Silvana Tenreyro, who will cast her first BOE vote next month.
Those voting for an increase may be joined by Chief Economist Andy Haldane, who said last month that the risks of leaving policy tightening too late
are rising.
Governor Mark Carney said that some removal was “likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional.”
Inflation is now at 2.9 percent, above the BOE’s 2 percent target. And while that’s squeezing consumers’ spending power and damping growth, the MPC’s tolerance for higher price growth is being tested.
Carney said last month that he will look at three factors to inform his decision about raising rates: the extent to which weaker consumption growth is offset by other areas of demand such as business investment, pay and labor unit costs, and how the economy reacts to Brexit.
His decision may have been further informed by data Wednesday that showed British consumers are continuing to see feeble wage increases, despite unemployment falling to a 42-year low. Regular earnings rose 2 percent in the three months through May from a year earlier, up slightly from April but well behind the rate of inflation. As a result, real pay fell by 0.5 percent.