posted at 04:50
Author Name: Tomas Hirst
Key Charts From The Bank Of England Inflation Report
Is the Bank of England right to hold interest rates at near zero? These charts from today's BofE Inflation Report show why the majority of the BofE's Monetary Policy Committee remains comfortable with keeping rates low. The low-skilled jobs we've created aren't high-productivity jobs, which could hobble further economic growth. Job growth has been among lower-paid workers, and that hasn;t been putting much pressure on overall inflation which remains at historic lows. The increase in Britain's labour supply over the crisis, driven by net migration and increased domestic participation, has more than offset increased employer demand for workers, and kept wage growth restrained. "Taken together, [the data] paints a picture of a widening distribution of fortunes across the labour market - a tale of two workers. The upper peak of the labour market is clearly thriving in both employment and wage terms. The mid-tier is languishing in both employment and real wage terms. And for the lower skilled, employment is up at the cost of lower real wages for the group as a whole. This has been a jobs-rich, but pay-poor, recovery." One of the clearest signs of this slack in the UK's labour market is that, despite pay finally outpacing inflation in September for the first time in five years, wage growth remains low. Although BofE Governor Mark Carney said on Wednesday that he expects wage growth to increase to around 3.25-3.5% between 2015-2016, "That's needed to achieve the inflation target over the forecast horizon". In its Inflation Report the Bank says that MPC members expect productivity "To pick up gradually as the effects of the financial crisis continue to wane".

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