Inflation has come down but if we look underneath the headline, we should not be, in the UK and I think that's true in the US as well we shouldn't be seduced by headline inflation because of the role of energy and external aspects working through both directly energy as well as on the goods side.
There was a lot of new wage agreements in April this year. There will be wage negotiations next year, which will be in relationship to the negotiations that just happened. So some people at the bottom got quite a bit of an increase, rightfully so.
Catherine Mann, one of four policymakers opposing interest rate cuts, warns UK against being swayed by inflation fall. Services inflation and wage dynamics pose challenges to achieving sustainable headline inflation.
Mann fears an upward ratchet effect within the services sector due to the resistance of services prices to fall, driven by maintaining wage hierarchy relationships. New wage agreements influence future negotiations and adjustments upwards.
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