A Bank of England policymaker has said interest rates should be cut three more times in 2025 as he cautioned the inflation outlook was at greater risk of being pushed “off track” amid global trade woes.
Alan Taylor, who is an external member of the Bank’s Monetary Policy Committee (MPC), said in a speech at the European Central Bank Forum (ECB) in Portugal that rates needed to come down at a faster pace, given the “deteriorating outlook”.
Mr Taylor was out-voted in calling for a quarter point cut in June, with the majority of the MPC deciding to keep rates on hold at 4.25%.
The Bank had reduced rates in May by a quarter point, down from 4.75%, but Mr Taylor had voted for a steeper half point cut.
In his speech on Wednesday, he said: “Previously, I had seen a UK soft landing in the cards, with some remaining upside risks to inflation from the bump in 2025.
“Now I see that soft landing as being at risk, and greater probability of a downside scenario in 2026 pushing us off track, as demand weakness and trade disruptions build.”
He said that while energy prices “remain a big unknown”, they are not the “only factor in play”.
He said the inflationary impact of the hike in national insurance contributions and price hikes should “fade out” in the new year, but that weakness in the economy is building.
On his June call for a back-to-back rate cut, he said: “My reading of the deteriorating outlook suggested to me that we needed to be on a lower rate path, needing five cuts in 2025 rather than the market-implied quarterly pace of four.”
