Jobless fall best guide to wage pressure, says Weale

Martin Weale told the audience at Hull University Business School that the Bank should not take too much comfort from a sharp fall in British inflation because it had been “significantly depressed” by sterling’s appreciation and by falling oil and commodity prices around the world, something the central bank would look into next month.

However, he said that he would continue to take the economic outlook for the euro zone and the global economy into account when he voted on rates.

Mr Weale and Ian McCafferty are the two members of the Bank’s nine-strong Monetary Policy Committee who voted in favour of an increase in the Bank Rate in August and September. They argued that it was time to start raising borrowing costs in anticipation of a pick-up in inflation, as Britain’s economy was growing quickly.

A combination of weak growth in wages, low inflation and the increasing risk of a recession in the euro zone have caused financial markets to all but rule out a rate rise this year.

Mr Weale struck a contrasting note as he explained why he was voting for rate hikes now. He said the big degree of uncertainty among policymakers about how much spare capacity remains in Britain’s economy meant the pace at which unemployment was falling probably represented the best indicator of wage prospects in the second half of 2015.