Bank of England Deputy Governor Dave Ramsden said on Thursday that he expects interest rates to rise further, but that he would consider cutting rates if the economy and inflation pressures turn out to be different than he expects.
Ramsden is not the only member of the Monetary Policy Committee to mention the possibility of cutting interest rates at some point. The BoE earlier this month said market expectations for interest rates north of 5% were too high.
Ramsden said that while he is biased towards further tightening, if the economy develops differently than expected and inflation is no longer a concern, he would consider reducing Bank Rate.
But Ramsden also said that if inflation pressures turn out to be more persistent than expected, he would continue to vote in favor of taking strong action.
He said that his approach to setting policy is to be "watchful and responsive."
Earlier this month, MPC member Silvana Tenreyro said she saw rates on hold this year and then falling in 2024. Another MPC member, Swathi Dhingra, has warned that an over-tightening of policy could stoke a deep recession.
A recent Reuters poll showed that a majority of economists believe the Bank of England will raise interest rates next month to 3.5%. However, almost a quarter of those surveyed said a bigger rate hike to 3.75% was likely.
The Bank of England has raised interest rates eight times since December 2021.
Ramsden stated that the government's budget statement, which was published earlier this month and included tax hikes and spending restraint, was likely to have a negative effect on economic growth and inflation.
Ramsden noted that most of the measures will not take effect until 2025, and as such will have very little impact on the MPC's three-year forecast horizon.
Ramsden said that he was aware that the BoE's actions were making it harder for households - but added that the MPC had to take the steps necessary to return inflation to the BoE's 2% target.
Ramsden stated that Britain's international reputation has not yet fully recovered from the financial turmoil unleashed by former finance minister Kwasi Kwarteng's Sept. 23 mini-budget, despite a fall in borrowing costs. He added that this is reputation is something that takes time to rebuild.
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