By Ian McConnell
MICHAEL Saunders, who voted for a rise in interest rates last month, said yesterday “there could be particular advantages” in waiting for more evidence of the Omicron Covid variant’s impact on public health and the economy in setting monetary policy.
Mr Saunders, an external member of the Bank of England’s Monetary Policy Committee, and Bank deputy governor Sir Dave Ramsden voted unsuccessfully for a rise in UK base rates from their record low of 0.1 per cent to 0.25% in November. The other seven MPC members voted for no change.
In a speech yesterday, Mr Saunders said: “In considering if and when to adjust rates, there is always a case to wait and see more data. At present, given the new Omicron Covid variant has only been detected quite recently, there could be particular advantages in waiting to see more evidence on its possible effects on public health outcomes and hence on the economy.
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“But continued delay also could be costly. If the economy continues along its recent path, then maintaining the current highly accommodative policy stance would probably allow the labour market to tighten further and, with inflation well above target, reinforce risks of a further rise in long-term inflation expectations. This could require a more abrupt and painful policy tightening later.”
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The next rate decision will be announced on December 16.
Noting his November vote, Mr Saunders said: “If the economy develops as I expect, then some additional tightening, on top of such a move, probably will be needed fairly soon. But policy is not on auto pilot. The pace, and scale, of any monetary policy changes will depend on economic developments and the outlook. In particular, at the December meeting, a key consideration for me will be the possible economic effects of the new Omicron Covid variant, and the potential costs and benefits of waiting to see more data on this before – if necessary – adjusting policy.”
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