New BoE rate-setter Haskel strikes cautious note,
sterling falls
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[June 26, 2018]
By David Milliken and Andy Bruce
LONDON (Reuters) - New Bank of England
rate-setter Jonathan Haskel offered a more downbeat assessment of the
British economy's readiness for higher interest rates than the official
he is due to replace, in comments that weighed on sterling on Tuesday.
Haskel, a professor at Imperial College in London, pointed to
persistently weak wage growth and said there could be more slack in the
labor market than currently estimated.
While Haskel agreed with the gist of the BoE's guidance that rates will
probably need to rise, investors judged his tone to be more dovish than
Monetary Policy Committee member Ian McCafferty, a long-time advocate of
higher rates whom Haskel replaces in September.
Last week the BoE bolstered expectations that it will raise rates in
August for only the second time in a decade, after its chief economist
unexpectedly joined the minority of policymakers voting for a hike.

But Haskel appeared to place less urgency on the need for higher rates
in the months ahead, sending sterling down by around half a percentage
point against the U.S. dollar.
The productivity expert cited theories that a high number of workers
with too few or precarious hours helped explain why wage growth -- key
to the outlook for interest rates -- has failed to take off as the BoE
expected, despite the lowest jobless rate since the mid-1970s.
"I think it's an urgent priority to look at that, there are a lot of
arguments in favor of that view," Haskel told lawmakers during an
appointment hearing.
Workers' bargaining power had probably also been weakened by the greater
global mobility of capital and technological change, he said -- though
in the longer term he was optimistic about technology's ability to boost
British productivity.
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Professor Jonathan Haskel, who has just been appointed to the
Monetary Policy Committee of the Bank of England, is seen in this
undated portrait released by HM Treasury in London, Britain, May 31,
2018. Jason Alden/UK Treasury/Handout via REUTERS

Haskel said it would be premature for him to offer a firm path for his thinking
on interest rates, given he had yet to access the BoE's analysis.
By contrast McCafferty -- who steps down at the end of August -- said in a
speech on Tuesday the BoE "should not dally" when it comes to raising rates from
their current level of 0.5 percent.
Haskel was more circumspect about the economic outlook in his testimony to
lawmakers.
Gauging the amount of slack in the labor market was difficult given the huge
variety of jobs on the market, he said, adding: "All of this I think is in favor
of the notion that there may well be much more slack than we think."
Haskel also said Britain's economy risked a "temporary lull" if Brexit
negotiations went badly.
Neil Jones, head of FX hedge fund sales at Mizuho, said that comment "speaks
volumes" about Haskel's approach.
Haskel will serve a three-year term as an external member of the nine-strong
Monetary Policy Committee starting on Sept. 1.
(Additional reporting by Anu Shukla; Writing by Andy Bruce; Editing by Catherine
Evans)
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