Key measures of consumer price inflation remain “elevated”, a deputy governor of the Bank of England has said, pushing back against expectations of imminent interest rate cuts.
Sir Dave Ramsden, one of the Bank’s three deputies, said he was looking for signs of how “entrenched” key measures of wage inflation and price growth in the service sector are before voting for interest rate cuts for the first time since 2020.
“Although services inflation and wages growth have fallen by somewhat more in recent months than we had expected last autumn, key indicators of inflation persistence remain elevated,” Ramsden said in a speech to the Association for Financial Markets in Europe.
“In terms of my thinking about the future, I am looking for more evidence about how entrenched this persistence will be and therefore about how long the current level of bank rate will need to be maintained.”
Ramsden was one of six members of the monetary policy committee who in February voted to keep borrowing costs on hold at 5.25 per cent for another month, pushing back against two votes for further tightening and one vote in favour of a reduction to 5 per cent.
Advertisement
A majority of the nine-strong committee have said it is too early to declare victory over inflation, which has fallen from a headline rate over 11 per cent in October 2022 to 4 per cent at the start of the year.
The Bank makes its next interest rate decision on March 21, and will have more data on the state of inflation, the labour market, economic growth at the start of the year, and the government’s fiscal policy decisions at next week’s spring budget. Financial markets expect the MPC to keep the bank rate on hold for the sixth consecutive month, as traders have pared back their bets on major monetary easing this year.
Ramsden is the deputy governor in charge of financial markets and oversees the Bank’s quantitative tightening programme, where it is selling government bonds back to investors in an attempt to shrink its balance sheet. He said the QT process, which was criticised for being a “leap in the dark” by MPs this month, had not caused major disruption to the financial system.
