Bank of England Deputy Governor Dave Ramsden backed more interest rate hikes on Thursday, but said he would consider cutting rates if the economy and inflation pressures panned out differently to his expectation.
Ramsden is the latest member of the Monetary Policy Committee to mention the possibility of cutting interest rates at some point, after the BoE earlier this month said market expectations for interest north of 5% were too high.
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"Although my bias is towards further tightening, if the economy develops differently to my expectation and persistence in inflation stops being a concern, then I would consider the case for reducing Bank Rate, as appropriate," Ramsden said in a speech at King's College London.
But Ramsden also said he would "continue to vote to respond forcefully" if inflation pressures proved to be more persistent than expected.
He described his approach to setting policy as "watchful and responsive."
Earlier this month, MPC member Silvana Tenreyro said she saw rates on hold this year and then falling in 2024, while another, Swathi Dhingra, has warned that an over-tightening of policy could stoke a deep recession.
A Reuters poll published on Wednesday showed a majority of economists thought the BoE will raise rates again next month to 3.5% from 3.0%, although almost a quarter of them said a bigger rate hike to 3.75% was likely.
The BoE has raised interest rates eight times since December 2021.
Ramsden said the government's budget statement published earlier this month – comprising tax rises and spending restraint– was likely to push down on economic growth and inflation.
"However, the vast majority of these measures do not come into effect until April 2025 so will have very little effect over the MPC's three-year forecast horizon, relative to what was assumed in the November MPC," Ramsden said.
Ramsden said he was "acutely conscious" that the BoE was adding to households' difficulties – but added that the MPC had to take the necessary steps to return inflation to the BoE's 2% target.
Ramsden also added that Britain's international reputation had not yet fully recovered from the financial turmoil unleashed by former finance minister Kwasi Kwarteng's Sept. 23 mini-budget, despite a fall in borrowing costs.