Bank of England policymakers remain cautious over the pace of interest rate cuts
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Bank of England policymakers remain cautious about the pace of interest rate cuts.
Deputy governor Clare Lombardelli yesterday warned Donald Trump’s trade war will hit the UK economy but said ‘caution remains appropriate’ when reducing borrowing costs.
And economist Megan Greene, a member of the Bank’s Monetary Policy Committee (MPC) – which sets rates – said the group’s approach continues to be ‘gradual and careful’.
Policymakers last week cut rates by a quarter of a percentage point to 4.25 per cent.
President Trump’s trade war is expected to drive down inflation in the short-term due to ‘trade diversion, movements in the exchange rate and the trade policy uncertainty in itself,’ Lombardelli said.
But rate-setters yesterday said they were more focused on domestic issues in the UK when making their decision on how fast to cut borrowing costs.
Lombardelli said there was ‘substantial progress’ on wage growth falling by the end of the year but that it was ‘still too high’.
‘I’ll be more comfortable when I see material deceleration in the data over a longer period,’ she told the Bank of England Watchers’ Conference in London.
Last week’s interest rate cut revealed a three-way split among the nine-member MPC. Five, including Bank governor Andrew Bailey, Lombardelli and Greene, voted for the 25 basis points cut.
Two backed a half-point drop and two voted to hold rates at 4.5 per cent.
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