7/13/2018, 4:31 PM (Source: TeleTrader)
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BoE's Cunliffe leans to cautiousness in tightening

Jon Cunliffe, top official from the Bank of England, said on Friday in Cumbria that the "significant drop" in economic activity in the first quarter can be attributed to unfavorable weather and that expansion is "around or a little above" potential. He determined the mark to be at 1.5%. The deputy governor for financial stability and member of the Monetary Policy Committee warned caution is warranted in raising interest rates given that tools are at near or at their lower bound, against calls to "create future room for maneuver."

As prices and wages aren't picking up pace consistent with the target, labor market supply could be underestimated, he said, but nevertheless asserted there is "little slack left" and with "little spare capacity" in the corporate sector.

"Domestic inflation pressure may increase more quickly than we imagine. Productivity growth may disappoint even the MPC’s relatively low forecast – increasing inflationary pressure for any given level of activity, though I have to say here that as my colleague Silvana Tenreyro has argued, there are reasons to believe productivity growth might recover more sharply than we expect," Cunliffe stated.

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