BoE’s Haskel backs high rates, warns of labour market issues

Bank of England (BOE) policymaker Jonathan Haskel announced he will vote to maintain interest rates at a 16-year high during his final meeting next month, citing a “tight and impaired” labour market that could keep inflation above target.

Despite signs of easing inflation, Haskel emphasised the need for more evidence of a sustained decline in underlying price pressures before considering rate cuts.

His stance sets up a potential clash within the Monetary Policy Committee (MPC) at the upcoming August 1 meeting, where other members may push for a rate cut.

Haskel’s departure on August 31 could shift the committee’s balance, as he is one of its more hawkish members. The new member, appointed by Chancellor Rachel Reeves, could influence future policy decisions.

Haskel’s comments highlight ongoing concerns about the UK labour market’s impact on inflation, even as headline inflation reached the BoE’s 2 per cent target for the first time in nearly three years.

With wage growth at 6 per cent and potential increases in the minimum wage affecting overall wage setting, Haskel stressed the need for a cautious approach to rate adjustments.

His speech, the first from an MPC member since the UK election, leaves investors speculating on the likelihood of a rate cut in August, with current market bets reflecting a nearly 60 per cent chance of such a move.

Attribution: Bloomberg.