Inflation pressure limits BoE response to jobless rise: Broadbent

November 18, 2016 4:34 AM EST

Deputy Governor of the Bank of England Ben Broadbent speaks at a Reuters Newsmaker event at Canary Wharf in London, Britain, November 18, 2015. REUTERS/Neil Hall/File Photo


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LONDON (Reuters) - The Bank of England would be able to do more to counter a projected rise in unemployment were it not for a sharp increase in inflation pressure caused by sterling's fall since June's Brexit vote, Deputy Governor Ben Broadbent said on Friday.

Broadbent highlighted the trade-off the BoE faces between keeping "significant" inflation pressures under control without hurting employment.

"The MPC (Monetary Policy Committee) would be less inclined to accommodate above-target inflation if it didn’t also expect demand to fall slightly short of that supply potential," Broadbent said in a speech to the Society of Business Economists in London.

"It would be able to do more prevent any rise in unemployment if it weren't for the inflationary pressure brought about by the fall in the currency."

The pound is trading about 16 percent lower against the dollar since the June 23 referendum decision to leave the European Union, although it has recovered some ground after touching three-decade lows last month.

Broadbent said there was "some truth" to the argument that policymakers should "look through" big changes in the exchange rate because their effect on inflation eventually dissipates. But this did not mean that policymakers should be indifferent to the currency, he said.

(Reporting by David Milliken; Writing by Andy Bruce; Editing by William Schomberg)



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