Bank of England Deputy Governor: More evidence of cooling inflation is needed before another rate cut
Bank of England Deputy Governor Clare Lombardelli stated that more evidence of easing price pressures is needed before supporting another rate cut. She warned that a potential global trade war poses a threat to the UK's economic growth. Despite a 25 basis point rate cut earlier this month, the market does not expect a significant likelihood of another cut next month. Lombardelli emphasized the need to observe data to confirm the sustainability of the anti-inflation process before continuing to ease policy
According to the Zhitong Finance APP, Clare Lombardelli, Deputy Governor of the Bank of England, stated that she needs to see more evidence of cooling price pressures before supporting another interest rate cut. Clare Lombardelli also warned that the potential global trade war, following U.S. President Trump's threat to impose tariffs, poses a threat to the UK's economic growth.
Clare Lombardelli's remarks echo the signal of the Bank of England's gradual easing of policy. The Bank of England cut interest rates by 25 basis points as expected earlier this month but did not indicate a faster pace of monetary policy easing. Traders currently expect that the likelihood of the Bank of England cutting rates again next month is low.
Clare Lombardelli has gone further than other colleagues, such as Bank of England Governor Andrew Bailey, in defining "gradual." Many economists interpret it as a rate cut once per quarter, rather than at every meeting. Clare Lombardelli stated, "It depends on what we see in the data. For me, 'gradual' means we need to see more evidence that this anti-inflation process is still ongoing before we can continue to ease policy."
The Bank of England has committed to cautiously reversing the series of interest rate hikes implemented to combat inflation. Trump's election and the UK's latest budget may exacerbate price pressures, prompting the Bank of England to maintain a cautious stance on policy. The market currently expects that the Bank of England will only cut rates three times by the end of 2025, each by 25 basis points.
Although Clare Lombardelli stated that trade barriers "certainly have a negative impact on economic growth in the short, medium, and long term," she noted that the impact on inflation remains unclear. Economists speculate that if a global tariff war shifts world trade and dampens global demand, economies like the UK, which are not directly targeted by Trump's actions, may see disinflationary forces prevail.
Additionally, Clare Lombardelli indicated that domestic inflation threats in the UK are currently a greater concern and warned that the labor market "remains tight." She added that high inflation in the services sector "does indicate that we have a long way to go." Data shows that the UK's inflation rate rose above the Bank of England's target of 2% in October, and it is expected to rise to nearly 3% over the next 12 months