BoE's Lombardelli sees risk that persistent inflation will crystallise
TLT•Bank of England Deputy Governor Clare Lombardelli said conditions for persistent inflation in Britain were crystallising and that a further near-term rate increase was likely absent evidence of weaker inflation pressures. The BoE raised its benchmark rate to 4% from 3.75% last week.
1. Further rate increase possible
Lombardelli said she was likely to support another interest rate rise in the near term if there was no evidence of weaker inflation pressures. She voted with the 8-1 majority that raised Bank Rate to 4% from 3.75% last week, and said she would not rule December or February in or out as a possible timing for another move.
2. Labour market concerns
Lombardelli said her vote would be affected by developments in the Middle East conflict and by price and labour market data. She described Britain's labour market as being in “low gear,” with reduced hiring and job turnover, and said a mismatch between workers' skills and employers' needs could weaken the downward pressure on inflation from rising unemployment. She said the problem appeared particularly acute for workers aged 18-24.
