The Bank of England may have to cut interest rates if the UK economy slides into a prolonged, hard recession, a senior monetary authority official predicted today.
Sir Dave Ramsden, a deputy governor of the Bank, told the Bank of England Watchers conference today that “I would consider cutting bank rates if necessary” if households and businesses are under more financial pressure than expected.
The comments add to a growing body of evidence indicating that the Monetary Policy Committee (MPC) is nearing the end of its cycle of aggressive rate hikes to curb inflation.
Earlier this month, another deputy governor, Ben Broadbent, told investors his expectations for borrowing costs were too high, warning that if they hit 5 percent, the same amount would be taken out of the economy. will do it.
At the bank’s meeting earlier this month, it took the rare step of signaling to markets that it would send rates no higher than five percent at the time.
Governor Andrew Bailey and the rest of the MPC have raised borrowing costs eight times in a row, including a 75 basis point increase at their last meeting, the biggest move in 33 years, to three percent.
The Bank of England’s GDP forecasts are gloomy
Most investors expect the bank to raise interest rates by 50 basis points on December 15.
Ramsden admitted his priority is “tightening up”.
Threadneedle Street has been raising rates for months despite warnings of a recession at every MPC meeting this year.
Earlier this month, Britain was predicted to plunge into its longest recession in two years on record, with GDP shrinking by almost three per cent.
The bank argues that walking cycles are necessary to prevent inflation from settling in the economy in the long run. Prices rose 11.1 percent last year, the fastest increase in 41 years.
Yesterday, the minutes of the last meeting of the US Federal Reserve pointed to a slowdown in interest rate hikes.
The Fed has cumulatively tightened financial conditions at its fastest pace since the early 1980s, including four consecutive 75 basis point increases.
The minutes open the door to a 50 basis point increase in mid-December. Fed officials noted that their actions hurt the US economy and that a recession may be necessary to avoid unnecessary damage to businesses and households.