Bank of England's Deputy Governor, Dave Ramsden, emphasized a cautious approach akin to mountaineering for upcoming interest rate cuts, as inflation risks are increasing. He highlighted the necessity of a careful descent in rates for safe economic management. Despite a recent rate cut, the Bank anticipates inflation will bump up to 3.7% later. Ramsden originally favored a more conservative approach due to fears of job market downturns but now views inflation risks as balanced. Policymakers are particularly attentive to the potential rapid downturn in the job market with upcoming national insurance contribution hikes.
A gradual and careful approach is always needed on the way down a mountain to ensure a safe descent and a successful outcome.
Inflation is now as likely to overshoot as to undershoot.
I think the risks are two sided... the evidence of recent months suggests that hitting the 2% inflation target sustainably in the medium-term are not to the downside.
Policymakers are concerned about the risks of a rapid downturn due to changes in employer national insurance contributions.
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