Bank of England deputy governor Clare Lombardelli has said she would not rule out voting for another interest rate rise in December, while warning that young people are bearing the brunt of a slowing jobs market.

In an interview with the Guardian published on Tuesday 10 November, Lombardelli said the next decision would depend on how the conflict in the Middle East, energy prices and the wider economic data develop. “But I wouldn’t rule it out. Equally, I don’t have enough information just yet,” she said.

Bank Rate rose to 4% last week

Lombardelli voted with the 8-1 majority on the Bank’s Monetary Policy Committee last week to raise Bank Rate to 4% from 3.75%, the first rise since August 2023. The minutes of that meeting said a further rise was likely to be needed in the near term.

The deputy governor for monetary policy said the economy was now in what she called a “low-gear economy”, in which employers are holding on to staff but freezing new recruitment. “It’s what I call a low-gear economy. So a labour market where you’re seeing a real fall-off in hiring. But actually, we’re not seeing much in the way of redundancies. What’s going on is this kind of low-hire, low-fire dynamic,” she said.

Young workers hit hardest

Lombardelli said the pattern was falling most heavily on people entering the workforce, because fewer vacancies mean fewer routes into employment for younger jobseekers. Youth unemployment has risen to its highest level since 2015 outside the Covid pandemic, while overall UK unemployment has risen to 4.7% this year.

She linked the slowdown to the war in the Middle East, which has pushed up energy prices and clouded the outlook for businesses. Employers facing higher costs, higher taxes and weaker demand from households squeezed by the cost of living are responding by holding back on hiring.

Separate figures underline the cooling. Hiring for permanent roles fell in October for the first time in four months, according to a survey by the Recruitment and Employment Confederation and KPMG published on Monday, days after the Bank raised rates.

What happens next

Lombardelli is expected to set out her concerns about the slowdown in labour market dynamism in a speech in London on Tuesday. The government is also awaiting a report on young people and work by former Labour cabinet minister Alan Milburn, which is expected next week.

The Bank’s next rate decision comes in December. Lombardelli’s comments leave the door open to a further rise, but make clear the decision is not yet made and will turn on the data between now and then.