In Full: Bank of England Policymakers’ Views After Cutting Rates

The Bank of England is giving investors a more detailed look at the range of views across the nine members of its rate-setting panel.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — The Bank of England is giving investors a more detailed look at the range of views across the nine members of its rate-setting panel. Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.The minutes released on Thursday by the Monetary Policy Committee set out each member’s views on the outlook for interest rates. The change was introduced in November as part of a revamp of the British central bank’s communications strategy following a review by former US Federal Reserve Chair Ben Bernanke. Read: Bank of England Expects Weaker Inflation as Rates Cut to 3.75%Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Here are their full comments explaining the BOE’s 5-4 decision to cut rates to 3.75%: Andrew Bailey, Governor (Vote: Cut)“Data news since our latest meeting suggests that disinflation is now more established. CPI inflation has fallen from its recent peak and upside risks have eased. Measures in the Budget should reduce inflation further in the near term. The key question for me now is the extent to which inflation settles at the 2% target in an enduring way. Slack has continued to accumulate in the economy. Unemployment, underemployment and flows from employment to unemployment have all risen. While I do not yet see conclusive evidence of a sharper downturn in the labor market, we should be vigilant. On the other hand, inflation expectations have not yet shifted downward sufficiently following the past few years of persistent above-target inflation. And the strength in forward-looking wage growth indicators is hard to reconcile with the downward momentum in current indicators of inflation and pay as well as rising unemployment. I will continue to assess these risks as the evidence accumulates. While I see scope for some additional policy easing, the path for Bank Rate cannot be pre-judged with precision, recognising in part the more limited space as Bank Rate approaches a neutral level.”Clare Lombardelli, Deputy Governor for Monetary Policy (Vote: Hold)“I continue to be more concerned by the upside risks to inflation, despite growth and inflation data since November having softened at the margin. The Budget should mechanically reduce annual inflation in salient categories, reducing the risk of second-round effects, but in absolute terms underlying inflation is still well above target-consistent rates. Disinflation in wage growth will be crucial in returning inflation sustainably to target, yet forward-looking indicators of wage growth from the DMP and Agents suggest little disinflation in wages over the next year. Elevated wage growth contrasts with softening labor market quantities. This could indicate structural issues in the economy which would sustain greater inflation persistence than embodied in the November central projection. I am also uncertain about the amount of restriction that our current policy stance is imparting, where signals across the data are mixed, and future policy reversal could be costly for policy credibility. This calls for retaining policy restriction and, all else equal, could require slowing the pace of future policy easing.”Huw Pill, Chief Economist (Vote: Hold)“I continue to judge the risk of inflation stabilizing at above-target levels owing to structural changes in price and wage-setting behavior as greater than the risk of inflation undershooting the target owing to weak demand. Underlying inflationary pressures are stronger than expected a year ago. A number of key indicators of underlying inflationary momentum – such as one-year ahead own price and wage expectations in the Decision Maker Panel, and households’ medium-term inflation expectations – exhibit a shallow saucer-shaped profile, raising concerns about a slowing or stalling in disinflation towards target. While I am attentive to risks from weak demand, still resilient private‑sector balance sheets provide some reassurance against a sharp downturn owing to a corporate cash-flow squeeze. Given this balance of risks, the case for the further withdrawal of monetary policy restriction is becoming more finely balanced, and any additional steps in this direction should be cautious.”Dave Ramsden, Deputy Governor for Markets and Banking (Vote: Cut)“I view the risks around inflation returning sustainably to target late in 2026 as broadly balanced, which is somewhat earlier than in the November central projection. The disinflation process is on track as nominal indicators continue to normalize. Labour market loosening has anchored this disinflation, and against the backdrop of weak activity and subdued sentiment, a further easing to come should lean against any remaining persistence in wage growth. However, elevated forward-looking surveys of wage growth give me pause for thought, particularly as structural supply-side issues, such as labor market participation, that previously sustained inflation persistence appear to be resolving. I will be focused on the results of the 2026 Agents’ pay survey. I continue to see downside risks from weak demand and particularly consumption. Consistently weak consumer confidence and ongoing fiscal consolidation contribute to a sluggish growth outlook, even if the announcement of the Budget offers some certainty. This outlook supports an easing in monetary policy. Further ahead, as restrictiveness falls and with uncertainty around the neutral rate, there could be scope to slow this cadence of easing in due course.”Sarah Breeden, Deputy Governor for Financial Stability (Vote: Cut)“I judge that disinflation remains on track and that upside risks have diminished a little further since November. Inflation, underlying services inflation, wage growth and households’ inflation expectations have all moved down. Activity data are also consistent with building slack, with a further rise in unemployment and weak employment growth. Previous explanations for why inflation might remain stubbornly above target have become less likely. The Budget has clarified that administered price shocks should not repeat next year. I recognize risks from potential structural changes to the labor market, in particular that matching efficiency may have fallen, and forward‑looking pay surveys are somewhat higher than I would prefer. However, Agents’ reports suggest firms are taking action to contain total wage bills. This, and the weak demand environment, should limit cost pass‑through. Downside risks to the demand outlook remain prominent. As in November, I think it plausible that a structural change in household behavior means the savings rate remains elevated. Combined with my view that policy remains restrictive and slack continues to build, this gives me enough confidence to cut now. Looking ahead, I will need a greater accumulation of evidence on disinflation as we feel our way towards neutral next year.”Swati Dhingra, External Member (Vote: Cut)“I see disinflation continuing and risks to activity skewed to the downside. Nominal indicators have been trending consistently in the right direction. Inflationary pressures have faded, with limited pass-through of global food price inflation to consumer prices, and the impact of domestic one-off factors having come through. Disinflation is particularly observable in underlying inflation measures. Moreover, the dynamics of household-led demand weakness, that have contributed to disinflation so far and contained second-round effects, are still very much at play. Weak household spending look set to continue, which should limit firms’ pricing power. The backdrop of a weak labor market is likely to restrain wage growth going forward. Unemployment has risen more rapidly than I expected, given how activity and real wages have evolved, and vacancies remain 10% below pre-pandemic levels. My outlook at this juncture is one of continued weakness in activity. And I am concerned that a protracted period of stagnation could impede supply-side growth. I favor easing policy now, and would not support a drawn-out normalization of our policy stance given the balance of risks.”Megan Greene, External Member (Vote: Hold)“I think risks to inflation have shifted to the downside since November. I put weight on threshold effects and the salience of food and energy prices in the inflation basket. The budget will mechanically reduce inflation below thresholds that feed into expectations largely because of lower energy prices. Recent food price and CPI price inflation surprised on the downside as well. This should reduce the risk of elevated inflation expectations generating second-round effects, but I remain concerned the disinflation process has slowed and may stall further. Forward‑looking indicators of wage growth from the Agents and Decision Maker Panel remain above target-consistent levels. This could buoy services inflation, while core goods inflation remains above pre-Covid averages. Financial and credit conditions are relatively easy, suggesting the monetary policy stance is not meaningfully restrictive. Labour market slack is rising and, while rising redundancies are a concern, there is little evidence a non-linear rise in unemployment is imminent. Labour market adjustments may also be buffered by resilient corporate balance sheets and loose credit conditions.

As Bank Rate approaches neutral, the contribution of monetary policy versus structural factors to disinflation could become harder to discern. This warrants a more cautious cadence of easing.”Catherine Mann, External Member (Vote: Hold)“My decision was quite finely balanced, and made more challenging by the effect of various policies on wage and price dynamics. Two key judgments underpin my decision. First, despite the Budget’s expected mechanical reduction in near-term inflation, this may not be enough to rein-in elevated household inflation expectations that have formed during a prolonged high‑inflation environment. CPI inflation remains above target, services inflation remains high relative to international peers, and core goods inflation is well above historical target‑consistent rates. Second, despite soft private-sector activity, this has not yet sufficiently disciplined wage and price growth. Market sector output is indisputably soft, private employment is falling, and redundancies and business dissolutions are rising. I am particularly attentive to the possibility that these could be signs of a non-linear adjustment. Counterbalancing these data, forward‑looking wage measures are above target‑consistent ranges, government spending and employment has risen, and any potential fiscal overspend could reduce slack, as has been the case in the past. In light of these risks, and given that restrictiveness in financial conditions has already eased over the year, policy needs to remain restrictive for some time longer.”Alan Taylor, External Member (Vote: Cut) “Recent developments align with my stated view of the medium-term trajectory: the two key trends are steadily mounting downside risks and inflation firmly on track towards target. The news implies a path for inflation next year that reaches target sooner than in the November central projection. The inflation hump is subsiding a bit earlier: tax and administered price increases drop from annual CPI by April and food inflation is abating faster than expected. High‑frequency CPI indicators, overall and core, are close to target. Wages are on a target‑consistent path, based on incoming settlements data; AWE follows with a lag. Labour market news shows continued loosening. Redundancies are now on the rise and unemployment keeps climbing, markedly so among cyclically-sensitive younger cohorts. Demand is subdued, with surveys signaling weak output, deteriorating investment intentions, and low consumer confidence. Company dissolutions are increasing. These worrying trends point to the risk of at least a costly undershoot on inflation, if not a sharper non-linear deterioration in activity and the labor market, should we brake too hard. I see neutral at about 3%. Given transmission lags, and with inflation expected near target by late 2026, we should be heading there sooner rather than later.”Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.