Bank of England MPC member ‘less concerned’ that rates might have to rise

Bank of England MPC member ‘less concerned’ that rates might have to rise

A member of the Bank of England’s interest rate-setting panel has said she is “less concerned” now than in December that rates might have to rise further.

Sarah Breeden said that less than two months ago she was still worried that persistent inflation might mean further “tightening” would be necessary.

But since then evidence has shown that Consumer Prices Index (CPI) inflation is continuing to fall, and at a faster rate than had been previously expected.

Last week the Bank’s Monetary Policy Committee (MPC), which Ms Breeden sits on, kept interest rates unchanged at 5.25%. But for the first time since the pandemic, one member of the committee actually voted to cut rates.

Economists assume that rates have likely peaked, and will start to fall at some point this year.

But the forecasts the Bank released last week also mean that the cuts might fall later than previously expected.

“In December, I judged that domestic risks were skewed to the upside,” Ms Breeden said on Wednesday in a speech.

“As I set out then, the high inflation scenario would also, in my view, be the more costly of the two, and so was the more important scenario to lean against when setting monetary policy.

UK inflation rate
(PA Graphics)

“At that juncture, the question I was focused on was whether there was evidence of more persistent inflationary pressures which might mean we needed to tighten further.

“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.

“Instead my focus, and indeed the focus of many on the MPC, has shifted to thinking about how long rates need to remain at their current level.”

Ms Breeden also warned that for inflation in the services sector to return closer to the Bank of England’s 2% target, there would need to be “some combination” of workers accepting lower pay rises and companies accepting lower margins.

Jerry David is a seasoned Senior Reporter specializing in consumer tech for BritishMags. He keeps a keen eye on the latest developments in the gadget arena, with a focus on major players like Apple, Samsung, Google, Amazon, and Sony, among others. Jerry David is often found testing and playing with the newest tech innovations. His portfolio includes informative how-to guides, product comparisons, and top picks. Before joining BritishMags, Jerry David served as the Senior Editor for Technology and E-Commerce at The Arena Group. He also held the role of Tech and Electronics Editor at CNN Underscored, where he launched the Gadgets vertical. Jerry David tech journey began as an Associate Tech Writer at Mashable, and he later founded NJTechReviews in 2010. A proud native of New Jersey, Jerry David earned his Bachelor of Arts in Media & Communication with honors, minoring in Innovation and Entrepreneurship from Muhlenberg College. Outside of work, he enjoys listening to Bruce Springsteen, indulging in Marvel and Star Wars content, and spending time with his family dogs, Georgia and Charlie.