The Bank of England will likely have to start cutting rates sooner than previously thought, after raising them sharply in recent months amid signs of weaker inflationary pressures, senior official Silvana Tenreyro said on Tuesday.
“I expect the current high level of bank rates will require an earlier and faster reversal to avoid a significant drop in inflation,” Tenreyro said in the text of a speech he will deliver at the Royal Economic Society annual conference in Glasgow.
Tenreyro cast one of two votes to leave borrowing costs unchanged in March, while most of his colleagues on the Monetary Policy Committee supported a 25 basis point hike in the bank rate to 4.25% and opposed the interest rate hikes since December.
Investors are currently forecasting a 75% chance of another 25-point rate hike by the UK central bank in May and a more than 50% chance of another hike in August.
But Tenreyro said there were signs of a cooling in the labor market from data on private sector wage growth, which has fallen sharply in recent months, and he expects inflation to fall well below the government’s target. 2% of the Bank of England.
“With the bank rate entering tight territory, I think a more flexible stance is needed to meet the medium-term inflation target,” he said.
Source: Terra
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