BoE's McCafferty: wait for pay deals before judging low inflation effects

LONDON (Reuters) - The Bank of England should keep a close eye on pay settlements over the coming months to see if very low inflation will have longer-term effects, one of its rate-setters said in an interview published on Thursday.

Monetary Policy Committee member Ian McCafferty, who in January dropped his call to increase interest rates, also said an immediate interest rate rise would risk de-anchoring inflation expectations.

"I think it is unlikely that we will see a material change in behaviour, that people will forgo wage increases in a tightening labour market," McCafferty told the London Evening Standard newspaper. "But I can't rule it out until I see how people react at a time when we have active wage negotiation."

(Reporting by Andy Bruce, editing by David Milliken)