The central bank would need to maintain a \u201crestrictive monetary policy stance\u201d as it sought to squeeze out remaining persistence in inflationary pressures, he said in a speech to the British Chambers of Commerce conference in London. But he highlighted indicators of lower labour demand and hiring intentions and evidence of a \u201csignificant decline\u201d in wage growth in the year ahead.\u00a0<\/p>\n
\u201cWith moderate growth and a softer labour market, a wider margin of slack in the UK economy will support continued disinflation in the domestic economy and a gradual return of headline inflation to the 2 per cent target as we look beyond the near-term increase,\u201d Bailey said.\u00a0<\/p>\n
Business organisations have said they were being hit hard by chancellor Rachel Reeves\u2019 October Budget, including an increase in employers\u2019 national insurance contributions.\u00a0<\/p>\n
The BoE<\/a> has said there were several ways in which businesses could absorb this tax increase, including lower profit margins, higher prices for customers, or through cutting wages and efforts to lower employment.\u00a0<\/p>\n \u201cWhen we ask businesses, they tend to tick all the boxes,\u201d Bailey said. \u201cThat is understandable. Firms\u2019 margins are the first to adjust. But I am beginning to hear a bit more evidence of adjustments through pay and employment.\u201d<\/p>\n The BoE governor said continued efforts were needed to push inflation lower, as he reiterated that given \u201ctwo-sided risks\u201d to inflation \u201ca gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate\u201d.<\/p>\n But he suggested that recent increases in inflation driven by higher vehicle excise duty and increases in water and energy bills were not expected to last.\u00a0<\/p>\n \u201cWe do not expect that they will rekindle domestic inflationary pressures via new second-round effects as we saw it after the big global shocks that drove inflation up to much higher levels in 2021 and 2022,\u201d he added.\u00a0<\/p>\n Recommended<\/p>\n
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