Soaring house and jobs market ups pressure on Bank of England

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The IRM provides evidence that the economy was performing strongly before the Omicron version emerged today, giving Bank of England policymakers yet another headache.

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The bank is considering whether it has the guts to raise interest rates to check rising inflation. It is concerned that doing so will affect economic recovery.

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Today there were strong signals from the banking, housing and recruitment sectors that the UK was booming, at least until recently.

Halifax reported that home prices are rising at the fastest rate since 2006; 1% in November alone and 3.4% in the last quarter.

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Russell Galley, managing director of Halifax, said: “This is the fifth consecutive month that average home prices have increased by around £13,000 since June, and by more than £20,000 since this time last year.”

Buy to let mortgage specialist Paragon had a record year, with profits up 62% to £194 million. This allows it to double the dividend to approximately 26.1pa a share and initiate a £50 million share buyback scheme.

Chief Executive Nigel Terrington said: “We have delivered an outstanding performance. We are entering 2022 with strong pipelines at record levels.

And recruitment firm Page Group raised profit expectations for the year from £155 million to £165 million, assuming “unforeseen events” did not impact business.

All of which leaves the Bank of England’s decision at its Monetary Policy Committee meeting on 16 December finely balanced.

Many in the city think it should have already raised rates from a historic low of 0.1%.

Ben Broadbent, one of the bank’s deputy governors, said yesterday that the rapidly expanding job market poses a significant risk to inflation, as confirmed by Page today.

He said this is an “extremely challenging period for monetary policy”, with inflation moving “long north” of the 2% target.

Stock markets rose smartly today as investors bet that Omicron will at least be manageable and not lead to another lockdown that has hit the economy hard.

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