Bank of England policymakers split on when to cut rates
LONDON (Reuters) – Bank of England Governor Andrew Bailey has said inflation is moving in the right direction but some of his fellow interest rate-setters have sent different messages on how quickly the BoE should move towards a first cut in borrowing costs since 2020.
Financial markets put almost zero chance on a rate cut on May 9, after the next meeting of the Monetary Policy Committee. They are fully pricing a first move only in September.
Many economists think the BoE is likely to cut rates sooner than that.
Following is a summary of recent comments by MPC members.
ANDREW BAILEY, GOVERNOR
April 17, on a smaller-than-expected drop in inflation in March: “We’re actually pretty much on track for where we thought we would be… I expect that next month’s number will show quite a strong drop.”
April 16, on the different outlook for inflation in Europe and the United States: “The dynamics for inflation are rather different now, between Europe … and the U.S. I think there’s more demand-led inflation in the U.S. than we’re seeing.”
March 22: “The fact that we have a curve that has cuts in it for the year as a whole is not unreasonable to me.”
DAVE RAMSDEN, DEPUTY GOVERNOR
April 19: “Over the last few months I have become more confident in the evidence that risks to persistence in domestic inflation pressures are receding, helped by improved inflation dynamics.”
HUW PILL, CHIEF ECONOMIST
April 23, on the timing of interest rate cuts: “The combination of little news and the passage of time have brought a Bank Rate cut somewhat closer.”
“But the same lack of news gives me no reason to depart from the baseline that I already established on St. David’s Day (March 1).”
March 1: “In my baseline scenario, the time for cutting Bank Rate remains some way off.”
BEN BROADBENT, DEPUTY GOVERNOR
Feb 10: “We made a forecast that was conditional on an interest rate curve that had cuts in it. If you look at the forecast with constant interest rates, it is very clear that it is likely that interest rates will have to be lower at some point.”
SARAH BREEDEN, DEPUTY GOVERNOR
Feb 7: “As I have become more confident that persistence is likely to evolve as embodied within our forecast, I have become less concerned that rates might need to be tightened further.”
CATHERINE MANN, EXTERNAL MPC MEMBER
March 26: on markets nearly fully pricing in three quarter-point reductions in rates in 2024: “I think they’re pricing in too many cuts, that would be my personal view.”
JONATHAN HASKEL, EXTERNAL MPC MEMBER
March 28: “Although the fall in headline inflation is very good news, it is not informative about what we really care about: what we really care about is the persistent and the underlying inflation… I think cuts are a long way off.”
April 23: “The persistence of inflation depends a lot on how quickly that ratio (between job vacancies and unemployment) comes down… Reasonable people might reasonably disagree about the risks.”
MEGAN GREENE, EXTERNAL MPC MEMBER
April 18: “The numbers that we’re seeing in terms of wage growth and services inflation just aren’t consistent with a sustainable 2% (consumer price) inflation target… I just want to wait and see more progress in the direction that we’re looking for before I feel confident in cutting rates.”
SWATI DHINGRA, EXTERNAL MPC MEMBER
Dhingra, who was the only member to vote to cut interest rates in the March meeting, has not commented on monetary policy in recent months.
CLARE LOMBARDELLI, INCOMING DEPUTY GOVERNOR
Lombardelli, is due to join the BoE’s monetary and financial policy committees on July 1, replacing Broadbent.
April 16: “I’m not going to put a date on when I expect the UK to start the process of loosening monetary policy, but it clearly is the case that that will be the direction of travel for European economies.”
