Making the call, EEF, the manufacturer’s organisation, recognises that the decision is tight and that the Bank is concerned about the coming pay round. However, it believes the following factors give the Bank enough reason to leave rates as they are:
- Signs that growth in the international economy, especially the United States and parts of Europe, is weakening
- The added protection against inflation from the strength of the pound against the US dollar
- The expanding labour force provides more spare capacity in the economy than is commonly thought
- Limited evidence that higher inflation is feeding through into higher wages
EEF Chief Economist, Steve Radley, said:
“Whilst this may be the tightest call for some time, we believe that, looking forward, the weight of evidence remains against a rise. While UK growth has been healthy, a slowdown in the international economy will sap some of its strength. An expanding labour force also means that the economy can continue to grow at a healthy pace without generating inflation. “
ENDS