Bank of England (BoE) will not raise the interest rates till the prospects of stronger wage growth not emerge in the UK, bank’s deputy governor said on Saturday.
“Despite signs of skills shortage, the slow wage growth in the UK is unlikely to pick up any time soon and the picture remains murky further,” BoE deputy governor Ben Broadbent told bankers at an annual conference in Jackson Hole, Wyoming.
According to Broadbent, years of low productivity along with minimal wage hikes (since the 2008 financial slowdown) have most likely lowered wage demands of the British workers.
Last week, the BoE has cut down its forecast for wage growth by almost half this year to 1.25 percent.
The BoE expects a wage growth recovery to 3.25 percent in 2015. The figures are slightly lower than the pre-crisis average of 4.25 percent. Broadbent, however, called it uncertain.
Broadbent’s economic model says: “As people have become more adapted towards lower wage awards, it’s very much possible that the ‘norm’ of pay growth had gradually adjusted to a protracted period of low productivity growth.”
He also added that some data had suggested that wage hikes are likely to be coming any time soon.
Janet Yellen, Federal Reserve Chairperson, also echoed similar sentiments for economy growth, while putting more stress on the complex effects of the 2008 financial crunch on the US economy, government policymaking and American labour market.
Broadbent also stressed that both BoE and the Fed need to launch joint corrective measures to look at wage, unemployment and growth issue.
This would help the central banks to understand the changing global economies and plan corrective measures accordingly.