By Andy Bruce and David Milliken
LONDON (Reuters) -Bank of England Governor Andrew Bailey said he was very uneasy about the inflation outlook and that his decision to keep interest rates on hold earlier this month, which shocked financial markets, had been a very close call.
“I’m very uneasy about the inflation situation,” Bailey told the House of Commons Treasury Committee on Monday. “I want to be very clear on that. It is not of course where we wanted to be, to have inflation above target.”
“On the decision itself, however, it was a very close call in my view,” Bailey added.
He said a lack of official data about what had happened to around 1 million workers who were still on furlough when the government’s jobs protection programme ended on Sept. 30 had made him want to wait rather than raise rates this month.
The BoE said on Nov. 4 that most of the nine members of the Monetary Policy Committee wanted to wait for more figures on the job market, including data due on Tuesday, to be sure that raising rates was the right move.
That decision wrong-footed many investors who had thought previous comments by Bailey meant a rate hike was due to be announced by the BoE this month.
Bailey told the lawmakers on Monday that he thought the labour market was looking “considerably tighter” and anecdotal evidence suggested the end of the furlough scheme had not led to a rise in unemployment.
Michael Saunders, one of the two MPC members who voted to raise rates earlier this month, said he saw no risk of a wage-price spiral but the likelihood of a general pick-up in inflation was strong enough to justify higher borrowing costs.
(Reporting by Andy Bruce, writing by David Milliken, editing by William Schomberg)
