Bank of England rate-setter calls for interest rate cut
A top Bank of England rate-setter has dismissed the latest spike in inflation and doubled down on calls for further interest rate cuts.
Monetary Policy Committee (MPC) member Alan Taylor said the fresh inflation surge was driven by “one-off factors” related to President Donald Trump’s trade war.
Whilst he said recent trade progress, with the UK’s deals with the US and EU, was “welcome,” he warned they only touched small parts of the UK’s trade operations.
“I’m not going to pre-emptively announce my vote,” Taylor told the Financial Times, “but I think I indicated in my dissent that I thought we needed to be on a lower [monetary] policy path.”
He warned there was “more risk piling up on the downside scenario because of global developments,” adding Trump’s trade offensive would be a “drag on growth.”
UK growth surpassed expectations in the first three months of the year, as GDP expanded by 0.7 per cent.
Despite this, Taylor said he was still “pretty concerned” about the way the economy was heading.
Inflation spike to go away
The Bank of England slashed interest rates in its last meeting this month to their lowest level since 2023 at 4.25 per cent.
But the decision exposed major rifts in the nine-member panel. Taylor and Swati Dhingra pushed for a half point cut whilst hawks Huw Pill and Catherine Mann raised concerns about stubborn inflation.
Figures released last week showed inflation jumped up to 3.5 per cent in April, as the cost burden from Chancellor Rachel Reeves’ tax hikes on employers weighed on firms.
Taylor said: “[Higher inflation] is not coming from demand and supply pressures; for the most part, it’s coming out of one-time tax and administered price changes.”
The MPC member cited regulated price hikes such as water bills and energy caps as leading the surge.
[The Bank of England] forecast path is saying there is going to be an inflation hump and then it’s going to go away,” he said.