The Bank has been cutting rates since August in response to inflation coming back to its 2% target last year – but price rises are gathering speed again now, largely driven by energy prices.
Megan Greene, who sits on the Bank’s Monetary Policy Committee, said it is unlikely inflation persistence will “fade on its own accord”, following higher-than-expected forecasts for 2025 price rises last week.
But if it is more driven by constrained supply, “then that would sustain domestic wage and price pressures and would require Bank Rate to remain restrictive for longer”.
A Bank of England rate setter has called recent UK growth figures “uncomfortable”, and argued that policymakers should be cautious when cutting interest rates.
Speaking to lobby group the Institute of Directors, she said that while the process of inflation coming down is “broadly on track”, she echoed governor Andrew Bailey in backing a “cautious and gradual” approach to rate cuts.
