BANK OF ENGLAND Monetary Policy Committee (MPC) member Swati Dhingra said Britain’s high inflation is expected to ease and the central bank should move faster in reducing borrowing costs.
“The effects of the shocks driving the UK’s current high inflation relative to Europe will fade, and thus, we should not be overly cautious about cutting interest rates,” Dhingra wrote in a column for The Times on Friday.
Dhingra was one of two members of the nine-member MPC who voted this month to cut the Bank of England’s benchmark Bank Rate by 0.25 percentage points. The other seven members opted to keep rates unchanged at 4 per cent.
“The difference in inflation between the UK and our continental neighbours can be largely explained by administered prices and global commodity shocks. These should pass,” she said.
“We can afford to cut rates further and not put additional strain on economic growth without threatening the inflation target,” she added.
Britain recorded the highest inflation rate among the Group of Seven economies at 3.8 per cent in August. The Bank of England expects inflation to peak at 4 per cent in September before returning to its 2 per cent target in spring 2027.
At the same time, there are signs of weakness in Britain’s labour market as employers slow hiring.
Dhingra has regularly supported rate cuts, in contrast with many MPC members. Fellow member Megan Greene said on Wednesday that inflation risks may prove stronger than the Bank has forecast, warranting caution on rate cuts.
Governor Andrew Bailey also said that borrowing costs are likely to fall but the timing and scale would depend on inflation.
(With inputs from Reuters)
