Senior Bank of England policymakers struck differing tones over the outlook for interest rates on Tuesday, suggesting that a split on the Monetary Policy Committee persists in the run-up to its decision on borrowing costs next week.
Clare Lombardelli, deputy governor for monetary policy, said she worried more about upside risks to inflation, and also said the BoE might be nearing the end of its interest rate cutting cycle.
“I am very worried that we are seeing more pressure on resources in the economy, and that obviously leads to price rises. I think you can see it in the labour market,” she told parliament’s Treasury Committee.
“I am also perhaps less convinced than others about how restrictive monetary policy is at the moment, as in how far we are from reaching the end of the cutting cycle.”
Lombardelli said that as the BoE approaches the end of its run of rate cuts “and you don’t know where it is, you might slow down a bit to try and anticipate and find your way a bit more.”
She was among a slim majority of the MPC’s rate-setters who voted 5-4 to keep interest rates on hold last month.
Dave Ramsden, deputy governor for markets and banking who sought a rate cut in November, said he saw no evidence that inflation was not going to fall as the BoE expects.
In a written report published on Tuesday, Ramsden said it would become harder to discern the effect of monetary policy in controlling inflation as the BoE cuts rates towards neutral, the level at which they neither stimulate nor restrain the economy.
“I therefore think a gradual removal of policy restraint remains appropriate, allowing the MPC to assess carefully the balance of risks to inflation as the evidence evolves…,” Ramsden said.
Financial markets now put the chance of a BoE rate cut on December 18 at around 88% after signs from economic data that inflation pressure has eased.
Lombardelli said the BoE estimated that finance minister Rachel Reeves’ budget, announced last month, will knock around 0.4 to 0.5 percentage points off the annual rate of inflation from the second quarter of 2026.
Britain’s fiscal forecasts have estimated a 0.4 percentage-point reduction to inflation over the 2026/27 financial year as a result of policies in the budget.
Swati Dhingra, an external MPC member who has repeatedly backed rate cuts, said she was worried about food price inflation but the overall disinflation process was on track.
Catherine Mann, another external member, said she was more focused on longer-term behavioural changes in the economy after four years of inflation above the BoE’s 2% target than the short-term impact of the budget on price growth.
(Reporting by Andy Bruce and David Milliken）
