Dave Ramsden (pictured), deputy governor, said during a speech at the central bank’s Watchers’ Conference: “I favour a watchful and responsive approach to setting policy.
“Although my bias is towards further tightening, if the economy develops differently to my expectation and persistence in inflation stops being a concern then I would consider a case for reducing bank rate, as appropriate.”
Ramsden spoke about the economic environment that had led to the recent consecutive rises to the base rate, which has increased by 2.9 per cent cumulatively since December.
He said that as the committee became “increasingly focused” on more persistent inflation, it had tightened policy more sharply.
Ramsden said economic uncertainty was directly impacting businesses and households as it was limiting their confidence to plan ahead.
He said in November, ahead of the December meeting when the base rate first rose from its record low, GDP was expected to rise slowly and inflation was set to peak at 4.3 per cent in Q4 2021, then fall to 3.4 per cent by the end of this year. This would have put it near the Bank of England’s two per cent target.
“Fast forward a year and the November 2022 MPR forecast shows just how much has changed for the worse,” he added.
Ramsden said in conclusion: “However challenging the short-term consequences might be for the UK economy, the MPC must take the necessary steps in terms of monetary policy to return inflation to achieve the two per cent target sustainably in the medium term.
“By restoring low inflation, consistent with its remit, the MPC can best contribute to securing stability and certainty, the foundations for sustainable growth.”
