Bank of England policymaker calls for interest rates to be held; RMT to hold vote on Network Rail pay offer – as it happened
MPC member Swati Dhingra warns against that overtightening monetary policy could harm weak economy
Bank of England policymaker Swati Dhingra has called for UK interest rates to be kept on hold, warning that another increase in borrowing costs could damage the economy.
Speaking at the Resolution Foundation this morning, Dr Dhingra argues that there is little sign that the inflation shock from higher energy and imported good prices is becoming embedded in wages and margins.
Even after a year and a half of above-target inflation, there is little evidence for such cost-push inflation beyond what might be expected following an unprecedented terms of trade shock. Consumption remains weak and many of the tightening effects of monetary policy are yet to fully take hold.
Recent research indicates the persistent scarring effects of deep contractions associated with monetary policy tightening and energy market disruptions, indicating the harmful consequences of overtightening.
Such an approach would increase the downside risks of missing the inflation target in the medium term. In my view, a prudent strategy would hold policy steady amidst growing signs external price pressures are easing, and be prepared to respond to developments in price evolution.
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