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You can find the current article at its original source at https://www.theguardian.com/business/2017/mar/21/inflation-uk-wages-lag-behind-prices-mark-carney
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| UK wages will soon lag behind prices – will the Bank take action? | |
| (about 17 hours later) | |
| Judging by his comments, Mark Carney is blissfully unconcerned about inflation rising above its 2% target for the first time since 2013. The governor dismissed the unexpectedly sharp rise in the cost of living as a “single data point” when quizzed about it at a conference on ethics in banking held at the Bank of England. “We are talking about much bigger issues”, Carney added. | Judging by his comments, Mark Carney is blissfully unconcerned about inflation rising above its 2% target for the first time since 2013. The governor dismissed the unexpectedly sharp rise in the cost of living as a “single data point” when quizzed about it at a conference on ethics in banking held at the Bank of England. “We are talking about much bigger issues”, Carney added. |
| There’s little doubt that voters are unhappy about the morals – or lack of them – of those working in the financial services industry. But they are also concerned about living standards. After the latest rise, the annual rate of inflation is the same as annual growth in average earnings. Next month, wages will lag behind prices and real incomes will start falling. For millions of voters, there are not many bigger issues than that. | There’s little doubt that voters are unhappy about the morals – or lack of them – of those working in the financial services industry. But they are also concerned about living standards. After the latest rise, the annual rate of inflation is the same as annual growth in average earnings. Next month, wages will lag behind prices and real incomes will start falling. For millions of voters, there are not many bigger issues than that. |
| In truth, of course, Carney is more concerned about inflation than his apparent nonchalance would suggest. A combination of a rebound in oil prices and the fall in the pound since the EU referendum has resulted in a steady increase in inflation since the middle of last year, and there are more price rises in the pipeline. | In truth, of course, Carney is more concerned about inflation than his apparent nonchalance would suggest. A combination of a rebound in oil prices and the fall in the pound since the EU referendum has resulted in a steady increase in inflation since the middle of last year, and there are more price rises in the pipeline. |
| Competition between retailers will help keep inflation in check but the double whammy from energy prices and sterling could hardly have come at a worse time, since businesses are already having to cope with a higher minimum wage, pension auto-enrolment and the apprenticeship levy. Inflation is on course to hit 3% later this year. | Competition between retailers will help keep inflation in check but the double whammy from energy prices and sterling could hardly have come at a worse time, since businesses are already having to cope with a higher minimum wage, pension auto-enrolment and the apprenticeship levy. Inflation is on course to hit 3% later this year. |
| The pound rose on the currency markets on the possibility that interest rates will go up sooner than expected. That still looks premature given the lack of price pressure. Indeed, the squeeze on real incomes is likely to bear down on consumer spending over the coming months, and this will eventually feed through into lower inflation. | The pound rose on the currency markets on the possibility that interest rates will go up sooner than expected. That still looks premature given the lack of price pressure. Indeed, the squeeze on real incomes is likely to bear down on consumer spending over the coming months, and this will eventually feed through into lower inflation. |
| But Carney will have to justify the Bank’s inactivity as inflation moves further above its target during the spring or summer. He could argue that Threadneedle Street does not need to raise interest rates when the economy is set to slow anyway. He could say that the Bank will only need to act if and when wages start to rise in response to higher prices. He could even say that the economy is becoming a bit better balanced. But he will need to say something because this “single data point” will soon be followed by others. | But Carney will have to justify the Bank’s inactivity as inflation moves further above its target during the spring or summer. He could argue that Threadneedle Street does not need to raise interest rates when the economy is set to slow anyway. He could say that the Bank will only need to act if and when wages start to rise in response to higher prices. He could even say that the economy is becoming a bit better balanced. But he will need to say something because this “single data point” will soon be followed by others. |