BOE Weale: Risk Elevated Inflation Could Effect Wage Demands

LONDON – There is a risk that elevated inflation could
significantly effect inflation expectations, which may then get built
into wage demands, Bank of England Monetary Policy Committee member
Martin Weale said Monday.

“Rising inflation matters a lot as expectations may get built into
wage demands,” he said.

“There is obviously a risk of that (stagflation), just as there are
risks of all sorts of unpleasant things happening in the economy,” he
added.

Weale also told BBC Radio 4’s World At One Program that a small
rate hike now could perhaps prevent a larger increase further down the
line.

“My expectation would be that although there would be some costs,
it would, it would protect us from a squeeze later on needed to get
people’s inflation expectations back to the 2% target,” he said.

Minutes from January’s two-day monetary policy meeting show that
Martin Weale joined Andrew Sentance in voting for a 25 basis points
increase in Bank Rate.

Minutes from the February meeting will be released at 0930GMT on
Wednesday February 23.

-London newsroom: 4420 7862 7491; email: ukeditorial@marketnews.com

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