18 May 2023 - Bailey is concerned about a price wage spiral
Andrew Bailey spoke yesterday of his concerns that inflation is becoming embedded in the economy since the core is not falling as expected following eighteen months of rate increases. While the markets continue to speculate about when the Bank will pause the cycle of hikes, Bailey confirmed that it will continue to hike rates until inflation falls to its two per cent target. Bailey talked of his concern over two specific issues; the continued rise of food price inflation, which remains close to twenty per cent, and the tightness of the labour market, although the latest employment report showed that that pressure eased very slightly last month. He assured his audience of Chambers of Conference members that the Bank will continue to hike rates until the medium-term outlook is in line with the Bank’s remit. There were signs in the latest employment report that despite unemployment remaining at historic lows, it is slowly beginning to rise. In the first three months of the year, the unemployment rate surprisingly ticked up to 3.9%, despite evidence that more workers are returning following extended absences due to long covid. Beyond Currency Market Commentary: Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.