Bank of England interest-rate setter Jonathan Haskel said the inflationary heat still in Britain’s labour market suggested there was no way to cut interest rates from their 15-year high any time soon.
“The labour market is still historically tight. At current rates of change it would take at least a year to fall back to average pre-pandemic tightness,” Haskel said in a text copy of a speech he was due to make later on Tuesday.
“Rates will have to be held higher and longer than many seem to be expecting.”
Haskel’s message echoed that of most members of the BoE’s Monetary Policy Committee which this month kept borrowing costs on hold for a second meeting in a row after 14 back-to-back increases but said they were likely to have to stay high.
Haskel said people in Britain were finding it harder to get work suited to their skills than before the coronavirus pandemic and the country’s long-standing problem of weak productivity growth was also adding to inflation pressures.
Earlier on Tuesday, Deputy Governor Dave Ramsden sought to hammer home the BoE’s message that “monetary policy is likely to need to be restrictive for an extended period of time.”
On Monday, Governor Andrew Bailey said it was too soon to think about cutting interest rates as the BoE faced the “hard work” of getting inflation down to its 2% target from the latest reading of 4.6%, higher than in many other economies.