Bank of England Should Beware What Lurks Beneath GDP Bounce
Policymakers risk hurting the labor market by keeping rates too high for too long.
Keeping interest rates too high for too long is risky.
Photographer: Hollie Adams/BloombergThe Bank of England was smart to be the first among equals to raise interest rates this cycle. It may be making the mistake of being among the last to ease policy. Signs of an improving economy mask dangers in the labor market that policymakers should prioritize over their current worry — sticky services inflation.
Recent comments from three members of the BOE's Monetary Policy Committee have poured cold water on the chances of a first cut in official rates at its quarterly monetary policy review on Aug. 1. The MPC acknowledges official rates at 5.25% are restrictive, but seems reluctant to follow the European Central Bank's move last month to reduce borrowing costs.