{"id":289,"date":"2024-08-12T09:34:34","date_gmt":"2024-08-12T09:34:34","guid":{"rendered":"https:\/\/letiga.com\/index.php\/2024\/08\/12\/oil-price-rises-for-fifth-day-running-amid-middle-east-tensions-battle-against-uk-inflation-isnt-over-business-live-economics\/"},"modified":"2024-08-12T09:34:34","modified_gmt":"2024-08-12T09:34:34","slug":"oil-price-rises-for-fifth-day-running-amid-middle-east-tensions-battle-against-uk-inflation-isnt-over-business-live-economics","status":"publish","type":"post","link":"https:\/\/letiga.com\/index.php\/2024\/08\/12\/oil-price-rises-for-fifth-day-running-amid-middle-east-tensions-battle-against-uk-inflation-isnt-over-business-live-economics\/","title":{"rendered":"Oil price rises for fifth day running amid Middle East tensions; battle against UK inflation \u2018isn\u2019t over\u2019 \u2013 business live | Economics"},"content":{"rendered":"


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Introduction: Bank of England ratesetter warns against being ‘seduced’ by lower inflation<\/h2>\n<\/header>\n

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.<\/strong><\/p>\n

One of the Bank of England\u2019s hawkish policymakers has warned that the UK should not be \u201cseduced\u201d by the recent fall in inflation, given underlying price pressures in the economy remain strong.<\/p>\n

Catherine Mann<\/strong>, one of four policymakers who opposed this month\u2019s cut in UK interest rates, argues that services inflation remains too high for comfort, and that UK wages are rising faster than the Bank\u2019s models would predict.<\/p>\n

Speaking to the Economics Show with Soumaya Keynes<\/a> <\/em>podcast, released this morning, Mann <\/strong>explained that while goods inflation has fallen, services prices were still rising at over 5% per year \u2013 which, she feels, is not compatible with keeping headline inflation sustainably at 2%.<\/p>\n

She says:<\/p>\n

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<\/svg>Inflation has come down but if we look underneath the headline, we should not be, in the UK \u2014 and I think that\u2019s true in the US as well \u2014 we shouldn\u2019t be seduced by headline inflation because of the role of energy and external aspects working through both directly energy as well as on the goods side.<\/p>\n<\/blockquote>\n

Mann<\/strong> fears there is an \u201cupward ratchet\u201d effect within the services sector, as services prices rarely fall. Part of that process is \u201cthe desire to maintain certain wage relationships\u201d, she says \u2013 once the lowest-paid workers at a company get a pay rise, those above them push for one too<\/p>\n

Mann explains:<\/p>\n

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<\/svg>There was a lot of new wage agreements in April this year. There will be wage negotiations next year, which will be in relationship to the negotiations that just happened. So some people at the bottom got quite a bit of an increase, rightfully so.<\/p>\n

But the ones above them didn\u2019t, which means next year they will, because it\u2019s important to keep relative wages within a hierarchical structure, kind of in relationship to each other.<\/p>\n<\/blockquote>\n

In April the national living wage rose to \u00a311.44 an hour, an increase of almost 10%.<\/p>\n

Good producers can also deploy the ratchet technique to push up prices, Mann<\/strong> points out \u2013 which may take a long time to \u201cerode away\u201d.<\/p>\n

She says:<\/p>\n

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<\/svg>Firms look at their competitors and their competitors raise their prices a little bit. Maybe they\u2019re more efficient. They raise their prices a little bit, and their competitors raise it too. We do not see that behaviour on the downside.<\/p>\n<\/blockquote>\n

Mann<\/strong> also anticipates upside risks to goods inflation from higher shipping and transportation and all the issues in the Middle East, while wages keep rising faster than the Bank\u2019s models would predict.<\/p>\n

Mann<\/strong> explained:<\/p>\n

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<\/svg>\u201cIt takes multiple years for wages to catch up to all these desired real wages that workers want to have. And when it takes a long time, that means going forward, it\u2019s going to take a long time for wage deceleration to move us into a position where services (inflation) will decelerate.<\/p>\n<\/blockquote>\n

On a scale where one is ultra-dovish, and 10 is ultra-hawkish, Mann<\/strong> put herself as a 7 \u2013 down from a 10 in the days when she was voting to increase interest rates above their recent 16-year high.<\/p>\n

She, and three other members of the monetary policy committee, were outvoted by the other five members of the MPC at the start of this month, when UK interest rates were cut to 5% from 5.25%.<\/p>\n

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Inflation data due on Wednesday is expected to show a rise in UK CPI inflation, from 2% to 2.3%.<\/p>\n

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However, the latest labour force statistics due tomorrow morning are tipped to show a slowdown in wage growth\u2026<\/p>\n

The agenda<\/h2>\n