Monetary Policy Committee member Swati Dhingra said Bank of England policy makers are fighting for whether “gradual” base rate reduction should be limited to cuts every three months.
“I know ‘gradual’ is interpreted in the media as 25 basis points per quarter. That’s not really what the committee said,” said long-time Dove Dhingra.
Comments from members of the External Monetary Policy Committee came from a speech delivered yesterday at Birkbeck, University of London.
“I think everyone has a different definition. That’s not my definition.”
Since the first vote against the Nine-member Commission in September 2022, Dhingra has voted nine times to lower interest rates, more than any other member.
She said the key difference between committee members is that weak growth in the UK reflects low demand, which can be improved by lowering, rather than lack of supply capacity, which would indicate potential inflationary pressures.
“That’s the real…divergence,” she said. “From my point of view, I think a lot is actually demand, and demand is usually weak.”
“The consumption weakness just didn’t go away…I think that’s why I want to reduce the level of (monetary policy) restrictions.”
Her comment is because OFGEM regulators raised the energy price cap on UK bills by 6.4 per cent in April, raising the average electricity and gas cost for typical households to £1,849 per year, higher than £1,738 per year.
This will increase inflationary pressure, currently at 3%, with the central bank forecasting it to rise to 3.7% in the third quarter of this year.
Earlier this month, the Monetary Policy Committee lowered the base interest rate by 0.25% to 4.5% amid signs of a UK economy struggling.
Dhingra and Catherine Mann think more help is needed and voted for the 0.5% cut.
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