Bank of England's Rate Dilemma: Are We Nearing the End of Cuts?
Bank of England's Clare Lombardelli expresses doubts over further interest rate cuts achieving inflation targets. She suggests the neutral rate could be at the high end of 2-4%, limiting further reductions. Lombardelli, backing rate hold, highlights policy challenges amid ongoing changes.
- Country:
- United Kingdom
Clare Lombardelli, a policymaker for the Bank of England, has expressed her concerns about the feasibility of further interest rate cuts in achieving the central bank's inflation targets. In her annual report to the Treasury Select Committee on Wednesday, Lombardelli suggested that the neutral interest rate might lean towards the upper spectrum, within the 2-4% range identified in the Bank's analysis.
Lombardelli stated, "Looking at history, it's plausible that neutral may be closer to the upper end," indicating that the cycle of rate cuts could be approaching its conclusion. She clarified that while she does not assert the neutral rate has been reached, she remains skeptical of further easing measures maintaining sufficient restriction needed to sustainably hit the desired inflation target.
Remarkably, Lombardelli was among four members of the Monetary Policy Committee who defied the majority by voting to hold rates steady last month, at 4%, diverging from the vote to cut rates marginally from 4.25%.
(With inputs from agencies.)
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