With the economic outlook unfavourable, the Bank of England may not need to raise interest rates further
The Bank of England's (BoE) chief economist, Hugh Peel, said caution was needed about any further rate rises. Speaking at an event, he said: "Interest rate decisions are becoming more finely balanced and we may have done enough." Inflation is still too high, but after 14 consecutive rate hikes since the end of 2021, there is still much of the impact of monetary policy tightening yet to be felt, and policy transmission is still in the pipeline."
On the economic outlook, he said: "The UK (GBR) economy may be slowing down. Households have now used up the savings stored during the Covid-19 pandemic, consumer spending has slowed, and high interest rates are likely to weaken household spending further. So, do we need to keep raising interest rates even though the overall demand outlook is less optimistic? That's the key thing we're looking at or analyzing."
On the outlook for interest rates, he said: "Our policy tightening is not over, and in my view it is too early to talk about rate cuts." We are still at the stage of ensuring that inflation gets back to 2 per cent and we should not deviate from that."
In September, the Bank of England unexpectedly paused its most aggressive rate-raising cycle since the 1980s. The nine-member monetary policy committee was divided on the decision, with four of them calling for another rate hike. Peel supports the moratorium. Both economists and the market are pricing in a 50-50 probability that there will be another 25 basis point rate hike in this cycle.
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