According to Sarah Breeden, Deputy Governor of the Bank of England, the UK labor market is showing signs of weakening. At the same time, she believes the disinflation trend in the country is continuing.
Breeden notes that workers are finding it harder to get pay increases, while businesses can't simply raise prices to cover higher wage costs anymore. She believes that April's sudden jump in UK inflation to 3.5% was just temporary.
The Bank of England's Deputy Governor placed particular emphasis on financial regulation issues. Breeden said that any easing of the ring-fencing rules separating retail banking from risky investment activities would require strong justification. This cautious stance reflects the UK's position as a global financial center and its vulnerability to both domestic and external risks.
At the same time, the official signaled potential easing of capital buffer requirements for UK banks and relaxation of restrictions on risky mortgage lending. Consultations on these matters are currently in progress.