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According to two members of the Bank of England, Pill and Haskel, Britain’s labor market is fueling a wage-price spiral. In particular, Haskel believes unemployment may need to reach 6% to tame inflationary pressures.
These statements underline the Bank of England’s trend towards further interest rate rises, in stark contrast to investors who have begun to price in cuts after mid-2024.
An increase in the unemployment rate to 6% would imply more than 500,000 job losses and the highest level of unemployment since 2014. This would represent a dramatic increase from the current rate of 4.2% and would exceed the BoE’s own estimate of a rate of 5.1% by 2026.