(Bloomberg) -- Bank of England Deputy Governor Dave Ramsden said he would consider voting for quicker interest rate cuts if uncertainty around the UK economy clears in coming months.
On a day when official data showed inflation accelerated more than forecast in October to well above the BOE’s 2% target, the rate-setter said in a speech at the University of Leeds that he nevertheless expected the economy to “continue to normalize,” with an ongoing trend toward “low and relatively stable inflation.”
He went on to say that while he supports the Monetary Policy Committee’s guidance for slow reductions in borrowing costs given lingering economic uncertainties — including the impact of the Labour government’s first budget last month — he’d consider a “less gradual approach” if the evidence starts to “point more clearly to further disinflationary pressures.”
While Ramsden’s comments suggest he is less concerned about domestic price pressures than other rate-setter, putting him closer to the dovish end of the MPC, they indicate that uncertainty over inflationary threats domestically and abroad in the US are holding back support for rate cuts.
The rate-setters have been hemmed in by the threat of a fresh trade war sparked by President-elect Donald Trump, as well as Chancellor of the Exchequer Rachel Reeves’ Oct. 30 budget, which included measures that increased costs for businesses.
Ramsden was one of just two rate-setters to back reductions before a majority voted for the first cut in August. Since then, the BOE has loosened policy just once more earlier this month and traders expect little more than 50 basis points of easing over the next 12 months.
He said that the MPC’s published forecasts for growth to pick up and inflation to rise above target for the next two years are “plausible.” But he added it’s also “at least as likely that the disinflationary process sustains its recent trend, consistent with more symmetry in wages and price setting, with less domestic inflationary pressure.”
Ramsden also predicted that wage growth is more likely to be closer to 2% than 4%, saying this would a “key determinant” for services inflation — which the BOE is monitoring closely.
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