Tories: Wage rises could keep interest rates higher
Mel Stride says he is concerned about “pretty high wage increases" across the public sector which he believes could mean interest rates remain “higher for longer”. The shadow work and pensions secretary says he is not “overly concerned” about figures released by the ONS which show a rise of inflation to 2.2% for July. Report by Blairm. Like us on Facebook at http://www.facebook.com/itn and follow us on Twitter at http://twitter.com/itn
Transcript
00:00Clearly there's been a slight uptick. I don't think that in itself is anything to be overly
00:05concerned about. The direction of travel according to the OBR's forecast will still be back down
00:10to target in time. But what I do worry about is the way this government has very early on started
00:17to give out some pretty high wage increases across the public sector, 22% for doctors with no
00:25requirement for productivity improvements. That will be something that the Bank of England will
00:29watch very closely because that could feed into greater inflationary expectations around wages
00:35and that would mean potentially interest rates staying higher for longer than would otherwise
00:39be necessary. So a bit concerned about the government on wages and inflation. I think
00:46it's increasingly as I've just identified likely to be around wage push inflation. So they've given
00:5322% to junior doctors. There are other negotiations going on at the moment and I think to the extent
00:59that the government just simply concedes increases in wages with no commensurate requirement for
01:05productivity improvements, that in itself will be an inflationary pressure and I think will lead to
01:11interest rates being higher for longer which is going to hurt mortgage holders, businesses and
01:16people up and down the country. That is the risk.