Yahoo Finance Interest rates to remain high, warns Bank of England’s Breeden
Interest rates will remain at their 15-year highs for some time to come in order to bring inflation sustainably back to the 2% target, he deputy governor of the Bank of England (BoE) has said.
Sarah Breeden, in her maiden speech as deputy governor of the BoE, warned the economy “is moving in the right direction to return inflation to the 2% target, but our job isn’t done”.
Referring to the next vote on rates by the Monetary Policy Committee (MPC), she said in a speech to the Institute of International Finance: "I will approach each vote humbly and pragmatically, with no pre-determined policy path in mind."
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"Given what we know now, I can say that it will be important for monetary policy to be restrictive for an extended period in order to return inflation sustainably to the 2% target in the medium term," she added.
Wage growth and employment trends will be key to helping her decide how to vote in upcoming MPC meetings, Breeden explained.
"I will be focused on signs that the loosening in the labour market is accelerating, and wage growth is falling more sharply than expected," she said.
Deputy governor Ben Broadbent said earlier this week that there needs to be clearer evidence that wage growth is slowing before policymakers can think about cutting rates.
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Last week the BoE kept interest rates at a 15-year high for a third meeting in a row and said again that borrowing costs would probably have to stay elevated for an extended period.
However, investors see a strong chance of a first rate cut by May. A rate cut in June is now fully priced in.
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