‘Keep calm and carry on’, say MPC members
14th January 2016 By: Ranko Berich
MPC meeting – 14/1/16
“Keep calm and carry on” seems to be the message in today’s MPC minutes. Members took note of turmoil in global markets, falls to oil prices and a cooling in economic growth, but ultimately concluded that if energy prices stabilise the economy is on track to see a modest recovery in inflation.
MPC members once again showed extreme caution around judging how quickly unit labour costs will rise in the near future, and for good reason. It’s just not clear how much the labour market will tighten and how this will affect wages and inflation in the near term. The MPC has once again decided to wait for a clearer signal from the data.
Sterling has taken a beating recently, partly because the prospect of rates has fallen out of the MPC’s reckoning. However, if commodity prices bottom out in the first half of this year, the MPC notes that inflation will begin to pick up “materially”. This serves as a reminder not to be too complacent about the MPC, which could quickly change tack if it sees oil prices stabilise and unit labour costs begin to rise solidly.