BoE's Dhingra warns of deeper and longer recession with higher rates

Follow us on Google News:
 BoE's Dhingra warns of deeper and longer recession with higher rates
Image source: ©2022 Kalkine Media®

(Adds details)


LONDON, Dec 3 (Reuters) - Bank of England rate-setter Swati Dhingra said in an interview published on Saturday that higher interest rates could lead to a deeper and longer recession, adding there were few signs that demands for higher wages risked a wage-price spiral.

While most of her colleagues backed a 75 basis-point hike to 3% last month, Dhingra voted for a half-percentage-point increase in interest rates last month, and later told lawmakers the central bank could deepen an expected recession if it pushed up borrowing costs further.

"You do see a much deeper and a longer recession with rates being much higher," she told the Observer newspaper. "That is what I think we should all be worried about ... are we going to end up lengthening and deepening the recession if the tightening continues at the pace it is?"

In the interview, she also said there were few signs in the labour market that workers' demands for pay increases would lead to persistently high inflation, which has reached a 41 year high of 11.1%.

Britain is facing a winter of industrial unrest as workers from rail staff and teachers to nurses and paramedics take strike action to demand better pay as they struggle with a cost of living crisis.

"A wage-price spiral would mean wages should be above inflation," Dhingra told the paper. "Given that real wages are falling, that’s indicative that we’re not there at a wage-price-spiral point yet."

She said that those expecting further large hikes in interest rates were not taking in account BoE surveys suggesting a fall in investment and employment in the next two years.

"These are not trivial numbers. The market has clearly not realised how pessimistic that could be for the UK economy," she said. "The economic slowdown is here." (Reporting by Michael Holden; Editing by Frank Jack Daniel, William Maclean)

Disclaimer

The above content is directly sourced from Reuters under a contractual arrangement. The content is being provided as a convenience and for informational purposes only; and does not constitute an endorsement or approval by Kalkine Media of any of the products, services, or opinions of the organization or individual. The user is apprised that Kalkine Media bears no responsibility for the accuracy, legality, or content of Reuters, any external sites, or for that of subsequent links. The user is requested to contact Reuters directly for answers to questions regarding the content. Please note that Kalkine Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

Featured Articles