LONDON (MNI) – It would be totally the wrong time to raise the
inflation target while inflation is running above it, Bank of England
Chief Economist Spencer Dale says.
Dale also raised doubts about the idea of switching to a nominal
GDP target, despite the idea being floated by his next boss, current
Bank of Canada head Mark Carney and said the MPC was committed to
hitting its current target.
In a question and answer session following his speech at an MNI
event Dale acknowledged there was a risk the MPC to the MPC’s
credibility if it just carried on explaining away above target outturns.
Dale, however, believes inflation is set to hold above target for
some while yet.
“We have inflation persisting above target in our forecast over the
next couple of years. I’m very comfortable with that view in the MPC’s
Inflation Report,” he said.
He rejected the characterisation of himself as a hawk on the
committee.
“We’re all trying to do the same thing. We’re all trying to hit the
government’s 2% inflation target. I don’t know what hawks and doves
means, it seems to imply that some people care more about the inflation
target than others… I’m quite pleased that you find it hard to
typecast me as a result of this speech,” Dale says.
In his speech, Dale cited relatively elevated unit wage costs as a
key factor behind the stickiness of inflation.
The last time CPI was at, or below, the 2% target was back in
November 2009. Unit wage costs, meanwhile, in Q2, the most recent data
available, were up 4.0% on a year ago.
While pay growth has been remarkably subdued by historic standards,
with headline average earnings running just below 2%, it has not been
able to match the initial plunge, and subsequent flatlining, in output.
–London newsroom: 4420 7862 7491; email: drobinson@marketnews.com
[TOPICS: M$B$$$,M$$BE$]
