LONDON -Bank of England interest rate-setter Silvana Tenreyro said she needed more time to judge how the end of the government’s job-saving furlough scheme was affecting the labour market, adding to signs that she sees no urgency to raise rates.
“Uncertainty over the effects of the furlough scheme should be resolved over the coming months, which should help paint a clearer picture of the position of the labour market,” Tenreyro said in a speech to the Centre for Economic Policy Research.
Around 1 million workers were probably still on the government’s job retention scheme when it expired at the end of September, according to estimates, raising the risk of a rise in unemployment and under-employment.
Tenreyro also said a rise in inflation pressures from surging energy prices was likely to fade quickly.
She has adopted a different tone about the need to raise borrowing costs to that of Governor Andrew Bailey who signalled last week that the BoE would act to contain inflation risks.
The central bank’s new chief economist, Huw Pill, has said the question of whether to raise rates would be a “live” one at the BoE’s next meeting which ends on Nov. 4.
He said inflation was likely to hit or surpass 5% soon, more than double the BoE’s 2% target. Financial markets are pricing in a rate hike next week, although the consensus of economists suggests the BoE will wait until early 2022 before moving. [ECILT/GB]
In her speech on Monday, Tenreyro said that as well as the labour market, she needed more time to learn more about the persistence of disruptions to global and domestic supply chains which have pushed up inflation around the world.
“The effects of supply chain disruption should also be temporary and unwind as supply of some goods increases, and as demand rotates back towards pre-COVID consumption patterns,” she said. “The speed of this rotation is a key uncertainty, and will be related to the evolution of the pandemic around the world.”
Tenreyro said a recent slowing of Britain’s economic recovery was likely to continue in the coming months.