LONDON, Dec 18 (Reuters) – The Bank of England cut interest rates to its lowest level in nearly three years on Thursday after data this week showed British inflation fell sharply and the labour market cooled.
The BoE’s Monetary Policy Committee voted 5-4 to reduce borrowing costs to 3.75% from 4%. Below is a summary of the views of the nine policymakers:
MPC MEMBERS WHO VOTED FOR 25 BASIS POINT CUT TO 3.75%
ANDREW BAILEY, GOVERNOR
Bailey said he did not yet see conclusive evidence of a sharper downturn in the labour market but inflation expectations had not yet fallen much.
“While I see scope for some additional policy easing, the path for Bank Rate cannot be pre-judged with precision, recognising in part the more limited space as Bank Rate approaches a neutral rate.”
“We still think rates are on a gradual path downward. But with every cut we make, how much further we go becomes a closer call.”
SARAH BREEDEN, DEPUTY GOVERNOR
“Previous explanations on why inflation might remain stubbornly above target have become less likely.”
Breeden said the jobs market might be more inflationary than before but downside risks to demand remained prominent.
“Looking ahead, I need a greater accumulation of evidence on disinflation as we feel our way towards neutral next year.”
DAVE RAMSDEN, DEPUTY GOVERNOR
“I continue to see downside risks from weak demand and particularly consumption.”
“This outlook supports an easing in monetary policy. Further ahead, as restrictiveness falls and with uncertainty around the neutral rate, there could be scope to slow this cadence of easing in due course.”
SWATI DHINGRA, EXTERNAL MPC MEMBER
“My outlook at this juncture is one of continued weakness in activity. And I am concerned that a protracted period of stagnation could impede supply-side growth.”
“I favour policy easing now, and would not support a drawn-out normalisation of our policy stance given the balance of risks.”
ALAN TAYLOR, EXTERNAL MPC MEMBER
“These worrying trends point to the risk of at least a costly undershoot on inflation, if not a sharper non-linear deterioration in activity and the labour market, should we brake too hard. I see neutral at about 3%. Given transmission lags, and with inflation expected near target by late 2026, we should be heading there sooner rather than later.”
MPC MEMBERS WHO VOTED FOR NO CHANGE
CLARE LOMBARDELLI, DEPUTY GOVERNOR
“Elevated wage growth contrasts with softening labour market quantities. This could indicate structural issues in the economy which would sustain greater inflation persistence than embodied in the November central projection.”
“I am also uncertain about the amount of restriction that our current policy stance is imparting, where signals across the data are mixed, and future policy reversal could be costly for policy credibility. This calls for retaining policy restriction and, all else equal, could require slowing the pace of future policy easing.”
HUW PILL, CHIEF ECONOMIST
“While I am attentive to risks from weak demand, still resilient private-sector balance sheets provide some reassurance against a sharp downturn owing to corporate cash-flow squeeze.”
“Given this balance of risks, the case for the further withdrawal of monetary policy restriction is becoming more finely balanced, and any additional steps in this direction should be cautious.”
CATHERINE MANN, EXTERNAL MPC MEMBER
“Forward-looking wage measures are above target-consistent ranges, government spending and employment has risen, and any potential fiscal overspend could reduce slack, and has been the case in the past. In light of these risks, and given that restrictiveness in financial conditions has already eased over the year, policy needs to remain restrictive for some time longer.”
MEGAN GREENE, EXTERNAL MPC MEMBER
“Labour market slack is rising and, while rising redundancies are a concern, there is little evidence a non-linear rise in unemployment is imminent.”
“As Bank Rate approaches neutral, the contribution to monetary policy versus structural factors to disinflation could become harder to discern. This warrants a more cautious cadence of easing.”
(Reporting by Suban Abdulla; Editing by Hugh Lawson)
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