Speaking on Radio 5 Live, the Bank of England ‘s deputy governor, Ben Broadbent, has described the sharp fall in oil prices that we ‘ve experienced over the years as having an overall positive effect on our economy.
He argued that oil prices being as low as they are , having fallen by more than 70% in the last 18 months, has “boosted consumption and UK growth overall.”
“The drop” he said, “has been a pretty protracted one, and it will keep inflation below 1%, in all likelihood, throughout this year.”
He added that “after that it ‘s likely to rise, and indeed we expect it to go back to the target, if not to say a little above it in two or three years.”
Mr Broadbent said that, over the last two years, wages have gone up by some 7%, adjusted for inflation, something else that he said oil prices have influenced. This amounts to the fasted rate of wage growth since 2002.
However, in the Bank ‘s latest Inflation Report, they announced a reduction in their predictions for growth in weekly earnings, from 3.75% to 3%.
Commenting on the passage of the UK economy in recent years, he said that it was best considered as beginning in 2012/13 when, he said, “confidence about the Eurozone has started to come back”, and “the UK economy really got going.”
Within this timescale, he said, we ‘ve seen solid growth, though he maintained that there is still “no great urgency” to increase interest rates.
The Bank ‘s monetary policy committee recently voted once more to keep the base rate at 0.5%, with a unanimous vote of 9-0, with Ian McCafferty, who has voted for a rate rise in many of the previous meetings, now joining the no camp.
They also, in their latest Inflation Report, revealed a reduction in their growth forecast from 2.5% (the figure given in November) to 2.2%.