Bank of England should cut interest rates pre-emptively, says commitee member

Alan Taylor, a rate-setter on the Bank of England’s monetary policy committee (MPC), has urged for an immediate interest rate cut.

Mr Taylor highlighted that the UK is “in the last half mile on inflation” after the Office for National Statistics reported a slowdown in consumer prices index (CPI) inflation last month.

The official figures witnessed a slight drop to 2.5% in December from November’s 2.6%, yet inflation persists over the Bank of England and UK government’s target of 2%. The MPC decided to maintain rates at 4.75% during their December meeting, with Mr Taylor, alongside two other members of the nine-strong committee, having previously voted for a reduction of 0.25 percentage points.

On Wednesday, he said in a speech at the University of Leeds that interest rates should be cut further to ensure a “soft landing” for the UK economy.

He said: “On multiple fronts, UK businesses and households could face a near-term cashflow squeeze, and we need to keep a careful eye on this important potential downside trigger. I fully appreciate these challenges for businesses and households and the headwinds they pose for the UK economic outlook, together with all the other emerging downside economic risks in the UK and around the world.

“Right now, I think it makes sense to cut rates pre-emptively to take out a little insurance against this change in the balance of risks, given that our policy rate is still far above neutral and would still remain very restrictive.

“We are in the last half mile on inflation, but with the economy weakening, it’s time to get interest rates back towards normal to sustain a soft landing.”