A rate-setter at the Bank of England has said that she is “not thinking” about cutting rates despite a sharp fall in inflation yesterday.
In an interview with Bloomberg TV, Megan Greene, a member of the Bank of England’s Monetary Policy Committee (MPC), said “I’m not thinking about rate cuts.”
Rather than cutting rates, Green said “the question is whether Bank of England policy is restrictive enough.”
She suggested there were structural reasons interest rates would have to stay higher for longer. “I think markets globally have not really clocked on to this,” she said.
Markets are pricing in the first rate cut by mid-2024 with the key lending rate expected to reach 4.5 per cent by the end of next year.
However, policymakers have been pushing back against market expectations. Speaking earlier this month, Andrew Bailey said “it’s really too early to be talking about cutting rates.”
The MPC next meets in early December with markets widely expecting interest rates to be left on hold.
The benchmark rate stands at a post-financial crisis high of 5.25 per cent, but policymakers have opted to leave rates on hold for two consecutive meetings. Greene has been in the hawkish minority of MPC members who backed a hike.
Greene’s comments come after a sharp fall in inflation yesterday, which brought the headline rate below five per cent for the first time in two years.
Inflation fell significantly due to a steep fall in energy costs, but there were continuing signs of domestically driven price pressures. Despite a slight fall, wage growth remains at historically elevated levels.
Although Greene said yesterday’s data was “good news,” she said there was “still reasons to worry about the persistence of inflation.”
“Low productivity and high wage growth will make it hard to hit the inflation target,” she said.