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Fewer workers, higher wages

We think that most of the fall in the size of the UK’s labour force since the onset of the COVID-19 pandemic should eventually be reversed. Even so, we wouldn’t be surprised if this took another two years or so. That suggests to us that the labour market will be tighter for longer than the Bank of England expects, underpinning our view that interest rates will rise from 0.50% currently to 2.00% by end-2023. Bank of England Drop-In (17 March, 10:30 EST/14:30 GMT): The MPC has a tricky decision to make at its March meeting. Join Paul Dales and Ruth Gregory for a discussion about the outcome and the path ahead for UK growth, inflation and policymaking. Register here.

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