BoE Deputy Governor: Interest rates must remain 'restrictive'

Speaking at the Annual Meeting of the Society of Professional Economists organized by Bloomberg, Dave Ramsden emphasized that the Bank of England needs to keep interest rates at "restrictive" levels for some time to bring inflation down to the bank's 2 percent target.

Recalling that he, along with 5 other members of the Monetary Policy Committee, voted to keep interest rates at 5.25 percent at the bank's November meeting, Ramsden continued his remarks as follows:

"I continue to characterize my approach to monetary policy as cautious and responsive. I will continue to monitor indicators of persistent inflationary pressures and resilience in the economy as a whole. According to our latest forecasts, a restrictive policy stance is likely to be warranted for an extended period to return inflation sustainably to the 2 percent target."

BoE Deputy Governor Ramsden noted that the latest inflation data showed a slowdown greater than expected, but added, "However, services (sector) inflation remains very high at 6.6 percent, which points to more persistent inflationary pressures."

"PROBABILITY OF A RATE HIKE IS VERY WEAK"

Following the inflation data released in the UK this week, which showed a greater-than-expected slowdown, economists believe that the probability of the Bank of England raising interest rates at its meeting next month is very weak and that the tightening cycle has ended.

According to data from the Office for National Statistics, the Consumer Price Index (CPI) in the UK showed a greater-than-expected slowdown in October, rising 4.6 percent on an annual basis.

Inflation had been 6.7 percent on an annual basis in September.

In the UK, which has stood out for a long time as the country with the highest inflation among developed economies, inflation had become sticky despite the policy rate hikes that have been implemented since December 2021.

The BoE, in the tightening cycle that began in December 2021 when the interest rate in the country was 0.1 percent, raised the policy rate 14 consecutive times, bringing it to 5.25 percent in August, the highest level in 15 years. After an 18-month tightening cycle, the bank paused interest rate hikes for the first time in September and kept the rate steady.

The bank paused interest rate hikes for a second time at its meeting on November 2, with the expectation that October inflation would decline sharply due to the drop in energy prices.