Bank Says Inflation-Fighting Workers Must Accept Lower Pay

(CTN News) – To win the war against inflation, British workers will have to accept lower pay deals and companies will have to rein in profits, a senior Bank of England policymaker said.

One of the four deputy governors of the central bank, Sarah Breeden, said the inflation rate still had a long way to go before reaching the government’s 2% target.

In a statement released almost a week ago, Bank of Japan policymakers said interest rates would remain unchanged at the highest levels since the 2008 financial crisis, but she also noted that inflation in the service sector remains high.

If services inflation is to return to more normal levels, a combination of decreased pay pressures as well as higher margins will be needed in order to achieve this.

To deliver its first cut in interest rates since the start of the Covid outbreak, Threadneedle Street needs to see more evidence that inflation is falling back to its target and staying there.

Compared to a year earlier, inflation dropped to 4% from over 10% in December,

According to official figures. Due to a decline in global energy prices, most economists expect it to drop below 2% within months.

There is a possibility that the Federal Reserve could cut interest rates by up to one percentage point this year from the current level of 5.25% due to falling and a near-stagnant economic growth.

Inflation could creep closer to 3% by the end of the year due to underlying inflationary pressures from the domestic economy, which highlights the risks from rising service sector prices and persistent wage growth.

Breeden told the UK Women in Economics Network that salaries are growing by six to seven percent annually, significantly higher than they have been in recent years.

If they persist, they would be several percentage points higher than what would be consistent with the inflation target, given the current weakness in productivity growth.

In the three months to November, average workers’ earnings, excluding bonuses, grew by 6.6%, down from nearly 8% in July, the highest level since comparable records began in 2001.

Despite steady declines in job vacancies and rising unemployment, the UK labor market is at the moment experiencing a marked slowdown as a result of a steady decline in job vacancies.

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