MNI BRIEF:BOE's Bailey Sees Slack Opening Up, Cautious On Cuts

Bank of England Governor Andrew Bailey said businesses feedback and data make him believe the labour market is easing and that the policy rate is still on a downward path though caution is required.

Speaking to the Lords Economic Affairs Committee Bailey noted the problems with official labour market data and cited the Bank's own survey findings that pay settlements would come down from 5.4% last year to 3.7% as slack opened up, saying "I think we are seeing settlements coming down into that sort of territory."

With pay easing and job vacancies declining Bailey said the policy rate was on a downward path but he didn’t " want to give the impression that there is a preset path, because the uncertainty level is so high." (See MNI INTERVIEW: Recent Inflation Shocks Restrict Policy - Monti)

He said that Monetary Policy Committee members were divided over whether there had been structural changes in the labour market which would result in more wage rigidity and stressed the need for caution saying "it is going to be very gradual and very careful, because ...we've got this got this (inflation) hump.”