Yahoo Finance Bank of England official issues warning over interest rate cuts
Bank of England rate-setter Jonathan Haskel has said he wants to see more evidence that inflationary pressures are cooling before he votes for an interest rate cut.
Haskel, one of the two members of the Bank's monetary policy committee who voted to raise rates last week, told Reuters that it was right to worry about inflation becoming embedded.
“I’m not going to apologise for banging on about persistence because I think we’re right to.”
Interest rates were left at a 16-year high of 5.25% last Thursday, following a rare three-way split. Six rate-setters voted for no change, Haskel and Catherine Mann wanting to increase rates and Swati Dhingra pushed for a cut.
Haskel called the vote “finely balanced” but admitted to the possibility of changing his vote if inflation risks came down.
He said: “The signs that we’ve seen thus far are encouraging. I don’t think we’ve seen quite enough signs yet.
“But if we accumulate more evidence on persistence, then by the very logic I’ve just set out, I’d be happy to change my vote.”
Read more: Pensioners need £8,000 more a year to retire comfortably
Fellow hawk Mann said on Thursday that her vote was “finely balanced”, but also mentioned risks of “continued inflation momentum and embedded persistence”.
She said UK services inflation, on a three-month annualised basis, was 3.3 percentage points above headline inflation, compared with 1.8 and 0.7 percentage points in the US and euro area respectively.
Mann questioned how quickly goods and services prices in the UK would return to patterns consistent with the 2%. “I am not convinced that the near-term deceleration in headline inflation will continue,” she said.
Read more: How to save money on your council tax as bills set to rise by at least 5%
The BoE now expects headline inflation to hit its 2% target around April or May, about 18 months earlier than it previously thought after gas prices tumbled, before rising towards 3% at the end of 2024 as the impact of falling energy prices fades.
Markets expect at least three interest rate cuts this year, bringing the interest rate down to 4.5% by the end of 2024.
Watch: Bank of England says rates 'under review'
Download the Yahoo Finance app, available for Apple and Android.
