Wage settlements a major determinant of near-term monetary policy
The minutes of the meeting indicate that MPC members’ concerns about upcoming wage agreements have escalated since the December meeting. Members were of the opinion that the contracts negotiated since the December meeting and indications that recent agreements would affect wage demands in the near future had reduced the likelihood that relatively moderate three-year agreements would be landed.
Inflation forecast too low?
The minutes state that although the inflation outlook improved markedly between interest rate decisions and the CBI’s real rate had risen, the MPC had already factored these developments into the decision taken at its December meeting. In addition, the Committee considered it likelier that the bank’s most recent inflation forecast was too low rather than too high.