FXStreet (Łódź) - According to the RBS team of analysts the continued strength displayed by the UK labor market, combined with the considerable squeeze in wage inflation increases the monetary policy dilemma for the BoE.

Key quotes

"Current rates of employment growth suggest underlying conditions are tightening significantly faster than expected – wherever you think the NAIRU is, we are approaching it more quickly than expected."

"The increase in labour supply is not negligible – both as a result of demographic factors and inactivity continuing to fall as retired people return to work and the number of people classified as long-term sick diminishes – but supply continues to trail some way behind demand."

"Yet, headline wage inflation is barely positive in nominal terms, while CPI inflation hovers only a little below target."

"There is no easy answer, but the MPC will need to provide some clearer guidance on how it weighs up these competing influences if it wants to avoid undue volatility in financial markets."

"To date, policymakers have tended to focus on unit wage costs, which have remained fairly benign (output is weak, but wage inflation is weaker)."

Related Articles
  1. Forex Education

    Four Currencies Under the Spotlight in 2016

    With currencies having become the “tail that wags the dog,” in terms of their impact on the global economy, these four currencies will be under the spotlight in 2016.
  2. Forex Fundamentals

    These Currencies Are The Biggest Losers Of The Stock Downturn

    Here’s a list of the hardest-hit currencies amid the global stock market mayhem.
  3. Forex Strategies

    Will the Euro Continue to Rally? (EUO)

    The euro is rallying. Should investors chase this performance or is the real opportunity on the other side of the trade?
  4. Investing News

    China’s Forex Reserves Dropped Significantly

    China’s forex​ reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan​
  5. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  6. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  7. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  8. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  9. Investing

    Financial News Comparison: Bloomberg Vs. Reuters (BAC, GOOG)

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  10. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
COMPANIES IN THIS ARTICLE
Trading Center