Might make sense to wait for Omicron data before rates decision – BoE’s Saunders

Bank of England policymaker Michael Saunders, who voted for an interest rate hike last month, said on Friday he wanted more information about the impact of the new Omicron coronavirus variant before deciding how to vote this month.

“At present, given the new Omicron COVID variant has only been detected quite recently, there could be particular advantages in waiting to see more evidence on its possible effects on public health outcomes and hence on the economy,” Saunders said in a speech.

But there were also risks from delaying a rate hike too long because the current all-time low level of the BoE’s Bank Rate could cause the labour market to tighten further and push up already rising long-term inflation expectations.

“This could require a more abrupt and painful policy tightening later,” Saunders said. “For me, the balance between these considerations is likely to be a key factor at the December meeting.”

He said the rates were likely to rise over the next few quarters, assuming the economy behaves as expected.

Saunders was one of two members of the BoE’s nine-strong Monetary Policy Committee who voted in early November to raise Bank Rate to 0.25% from its pandemic emergency, all-time low of 0.1%.

The BoE is due to announce its next monetary policy decision on Dec. 16. After Saunders’ speech on Friday, investors were pricing in only a 30% chance of a December rate hike, down from about 75% last week before news broke of the Omicron coronavirus variant.

Might make sense to wait for Omicron data before rates decision – BoE’s Saunders