BoE's Broadbent Says Current High Inflation Unlikely To Persist Long

The current high inflation driven by oil prices is unlikely to persist for a longer period, Ben Broadbent, Deputy Governor of the Bank of England said on Thursday.

"I'm not convinced that the current inflation in retail goods prices should in and of itself mean higher inflation 18-24 months ahead, the horizon more relevant for monetary policy," he said.

He observed a degree of mismatch in the labor market. The mismatch added to the near-term pressure on wages. The full-time pay of those on furlough doesn't fall but, where there are shortages, firms have to pay more, said Broadbent.

"The behavior of labor costs will for me be important in judging the appropriate stance for monetary policy," he said. "This won't be straightforward."

Unfortunately, there is still a great deal of noise in the earnings data - base effects, shifts in furlough and in the composition of employment are all still distorting official estimates of wage growth, he noted.

"The outlook for aggregate demand growth still matters," he noted. "And for all the usual reasons and more, the committee will have to pay very close attention, parsing the official data as best it can, to the numbers in the labor market," Broadbent added.

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