'Wages won't keep up:' UK central bank says inflation biting

Posted May 12, 2017

Though higher rates would help limit inflation, which has been rising, the policymakers erred on the side of caution after economic growth more than halved to 0.3 per cent in the first quarter compared with the previous three months.

Behind the headline figures, however, the BOE's perception of the balance of growth has altered, partly in light of a consumer slowdown hitting growth earlier and more substantively than previously expected.

The Bank's quarterly forecasts published alongside the interest rate decision were for economic growth to edge up to 1.9% this year from 1.8% in 2016.

Asked about sterling's recent rebound: "It (inflation) has gone up 3 percent since February so it will have had at the margin, some depressive effect on inflation towards the end of the forecast".

The BoE has edged down its GDP forecast for the United Kingdom this year to 1.9% from 2%, but raised it by 0.1 percentage points in 2018 and 2019. Industrial production continues to fall " March's industrial production figures show that the pressure on consumers" real incomes from rising inflation is beginning to hurt manufacturers.

Brexit has exacerbated a trend of weak or non-existent pay growth that started well before last year's referendum.

The BoE will be deciding on interest rates and quantitative easing, as well as publishing its inflation report. The latest forecast puts inflation at a peak of 2.7% at the end of Q2 2017. The Resolution Foundation think tank noted that 40 percent of the British workforce have been affected by falling wages so far.

Tories win majority of council seats in East Renfrewshire election
The SNP remains the largest party in local government with 431 councillors voted in, up slightly from its total of 425 in 2012. Ms Davidson said the results showed "only the Scottish Conservatives have the strength to fight back against the SNP".

Judge in Sacramento court deems TN teacher a flight risk
Magistrate Judge Kendall Newman ordered Tad Cummins held in the meantime as both a flight risk and a danger to the public. Last week, authorities found the teenager in Northern California and arrested her forensics teacher, Tad Cummins , 50.

Buhari says Chibok girls will re-enter society
Parents anxiously scanned the list to see if their daughters were among those who were released three years after their capture. Neither the government nor Boko Haram, which has links to the Islamic State group, gave details about the exchange.

"The ECB's monetary policy measures have continued to preserve the very favourable financing conditions that are necessary to secure sustained convergence of inflation rates below but close to, 2%".

Almost a decade of pay stagnation and freezes, the prevalence of zero-hour contracts-amid a mushrooming of the lowly paid and highly exploitative "gig economy"-means one third of the population are now officially below the poverty line, while more than half of all households depend upon state benefits".

This was "concentrated in consumer-facing sectors, consistent with the impact of the fall in the exchange rate feeding through to household income and spending", the Bank added. In fact, the average household now owes around £13,000, excluding mortgages, and total unsecured debt is at an all-time high of £349 billion.

The pound is now trading down 0.57 percent against the dollar and 0.39 percent against the Euro (1320GMT). "Wages won't keep up with prices for goods and services they consume".

Samuel Tombs at Pantheon Economics said: "The MPC likely will place much more weight at next week's meeting on the weak official data for the first quarter than on April's better PMIs, and we expect Kristin Forbes to remain alone in voting to raise interest rates".

While the living standards of large sections of the working class are deteriorating post-Brexit, stock markets continue to show near record highs.

The fall in living standards and the UK's economic decline belie the claims of pro-Brexit sections of the ruling class that leaving the European Union would usher in a new era of prosperity for all. USDJPY has so far shrugged off any bad news to the pair, but if today's PPI numbers miss, traders could begin to take profits in earnest, especially since the pair now sits at the long term resistance corridor of 114.00-115.00. Nonetheless, wages remain an issue here in the UK.