LONDON British inflation is likely to rise quickly early next year from its current historically low levels, leaving the country at very little risk of persistent deflation, Bank of England policymaker Kristin Forbes said on Wednesday.
Forbes's comments are in line with forecasts for inflation made by the BoE last month, which predict inflation will rise from around zero to near its 2 percent target by late next year.
Consumer price inflation dipped below zero for the first time in more than 50 years in April. In May it was just 0.1 percent, largely reflecting a 40 percent fall in crude oil prices from a year ago.
Forbes, a U.S. academic and member of the BoE's rate-setting Monetary Policy Committee, said this effect would soon drop out of year-on-year comparisons, while the effect of sterling strength might last slightly longer.
"Inflation should bounce back fairly quickly from today's low levels, although the drag from sterling's appreciation will take longer to fade than the year or so from the drag from lower energy and food prices," she said in a lecture at the London School of Economics.
Forbes said there was no sign that low inflation was encouraging consumers to defer purchases in the hope of cheaper future prices, nor that below-target inflation was getting locked into wage deals or other contracts.
"Wage growth has picked up over the period that inflation has fallen," she said, referring to official data released earlier on Wednesday which showed British wages rising at their fastest rate in nearly four years.
Low unemployment, skills shortages in some sectors and more job-hopping suggest that wages will continue to rise, she added.
"The rapid normalisation of the labour market should continue to support wage increases, even in an environment with low headline inflation," she said.
Forbes's comments offered little clue as to how soon she might vote for the BoE to raise interest rates from their record low 0.5 percent, where they have been for more than six years.
All nine MPC members have voted to keep rates steady since the start of the year. Most economists do not expect the BoE to raise rates before early 2016, but some members may start to call for a rate rise before then.
(Reporting by David Milliken; Editing by Gareth Jones)
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