Bank of England deputy says inflation will fall to target as jobs market weakens

 

1. Bank of England deputy says inflation will fall to target as jobs market weakens; gold hits new record high

The United Kingdom may finally be seeing the first real signs of relief in itsش long battle with inflation. In a speech earlier this week, Bank of England Deputy Governor Dave Ramsden told investors that the central bank is now more confident inflation will return to its 2% target within the coming year. His remarks were based on evidence that the labor market, once exceptionally tight, is beginning to lose strength. As demand for workers cools, wage growth is slowing, which in turn reduces the upward pressure on prices that has troubled policymakers for more than two years.

For much of the post-pandemic recovery, strong wage growth fueled by a shortage of workers kept inflation stubbornly above target. The Bank responded with a series of aggressive interest rate hikes, raising borrowing costs to their highest level in over a decade. While these moves helped contain runaway price growth, they also slowed business investment and household spending. Now, Ramsden argues, the UK economy is entering a different phase—one where weaker labor demand and softer consumer activity are beginning to rebalance supply and demand.

However, the path back to stability is far from straightforward. Inflation has eased, but not evenly across all sectors. Food prices, energy bills, and housing costs remain uncomfortably high for millions of households. Even with wage growth moderating, many families still feel squeezed, and business leaders warn that fragile consumer confidence could undermine future growth. Economists caution that while the Bank may soon have room to cut rates, doing so too quickly could risk reigniting price pressures.

Financial markets have reacted cautiously to Ramsden’s remarks. While the pound sterling strengthened briefly on the expectation of a more stable economic outlook, the broader picture reflects ongoing uncertainty. Investors have increasingly turned to gold as a hedge against risk, sending the metal to a record high this month. The surge in gold prices is not just a reaction to UK-specific dynamics but also part of a global trend, as markets digest slowing growth in the U.S., uneven recoveries across Europe, and rising geopolitical tensions in Asia and the Middle East.

The gold rally underlines the deep unease that continues to shape investor sentiment. Traditionally seen as a safe-haven asset, gold often rises in value when confidence in currencies, equities, or government bonds weakens. Analysts say the current momentum in gold prices reflects both a hedge against inflation that has not yet fully disappeared and a broader insurance policy against possible shocks, from trade disputes to political instability. In this environment, gold’s appeal appears stronger than ever.

For households and businesses in the UK, the key question is whether the Bank of England can engineer a soft landing—bringing inflation under control without triggering a deep recession. If inflation does return to target while unemployment rises only gradually, policymakers may claim a rare success in balancing growth and stability. But if the jobs market deteriorates more sharply, the price of victory over inflation could be higher than anticipated.

In the coming months, attention will remain fixed on labor market data and consumer spending trends. Ramsden’s reassurance that inflation is heading in the right direction is welcome news, but markets and the public alike know that forecasts can shift quickly. For now, the UK finds itself at a crossroads: hopeful that the worst of the inflation storm has passed, but aware that the economic skies are still far from clear.