BOE's Breadbent: Deflation Unlikely in U.K.

        LONDON--A senior Bank of England official said Friday the chances of a damaging bout of falling prices in the U.K. are slim.
        Ben Broadbent, the central bank's deputy governor for monetary policy, said a recent slowdown in annual inflation in the U.K. has been driven largely by the fall in oil prices and that consumer-price inflation is likely to rise "quite steeply" in early 2016.
        He said data suggest wage growth in Britain is creeping up and should rise further as unemployment falls, adding to price pressures even if global inflation remains subdued.
        Moreover, he said that a sustained spell of falling prices, known as deflation, is extremely rare in developed economies with the means to set their own monetary policies and floating exchange rates.
        "The likelihood of a broad and protracted deflation, afflicting wages as well as prices, is pretty low," Mr. Broadbent said in a speech at Imperial College Business School, according to a text of remarks prepared for delivery.
        Mr. Broadbent's remarks offer new evidence that most BOE officials are relatively unperturbed by the current low level of inflation in the U.K. and that the central bank remains on course to raise interest rates from historic lows early next year. Investors expect the BOE to lift its benchmark interest rate from 0.5% in the first half of 2016, according to interest-rate derivatives that hug the BOE's benchmark.
        Annual inflation in the U.K. was zero in March, according to official data, its lowest level for more than 50 years. But BOE officials expect price growth to accelerate back to its 2% target over the next two years as the economy improves and last year's fall in the oil price drops out of the consumer-price inflation calculations.
        Still, Mr. Broadbent acknowledged that policy makers need to be alert for signs that feeble price growth is rippling through into lower wage settlements, which could delay inflation's rise back toward 2%.
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        (END) Dow Jones Newswires

        March 27, 2015 05:20 ET (09:20 GMT)


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