11/25/22, 11:16 PM Base rate can be cut if eco­nomy needs it, says Bank poli­cy­maker

Base rate can be cut if eco­nomy needs it, says Bank

poli­cy­maker

The Guardian · 25 Nov 2022 · 37 · Larry Elli­ott

Interest rates may need to start fall­ing again if cost of liv­ing pres­sures abate
more quickly than the Bank of Eng­land expects, a senior poli­cy­maker at
Thread­needle Street has said.
Dave Rams­den, one of the Bank’s deputy gov­ernors, said he was cur­rently sup­-
port­ing fresh increases in the cost of bor­row­ing but raised the pos­sib­il­ity that a
weak­en­ing eco­nomy may require a cut.
“Given the uncer­tain­ties we face, it is import­ant also to be humble about what
we don’t know or still have to learn. I favour a watch­ful and respons­ive
approach to set­ting policy,” Rams­den said.
“Although my bias is towards fur­ther tight­en­ing, if the eco­nomy devel­ops dif­-
fer­ently to my expect­a­tion and per­sist­ence in infla­tion stops being a con­cern,
then I would con­sider the case for redu­cing the Bank rate, as appro­pri­ate.”
Rams­den’s com­ments came as the latest snap­shot of man­u­fac­tur­ing from the
CBI pre­dicted the UK’s factor­ies were facing a tough winter.
The employ­ers’ lobby group said it expec­ted a rise in out­put to be short­lived,
since both domestic and export order books were below nor­mal for the time of
year.
Anna Leach, the CBI’s deputy chief eco­nom­ist, said: “The rise in man­u­fac­tur­-
ing out­put this month appears to be at least partly driven by improve­ments to
sup­ply chains, with sev­eral com­pan­ies report­ing they were able to ful­fil orders
as mater­i­als and com­pon­ents became more read­ily avail­able.
“Total order books remained much weaker than earlier in the year, however,
and out­put is expec­ted to fall again in the quarter ahead.”
Thread­needle Street’s mon­et­ary policy com­mit­tee (MPC) has raised interest
rates stead­ily since last Decem­ber from a record low of 0.1% to 3% and fin­an­-
cial mar­kets cur­rently expect offi­cial bor­row­ing costs to peak at 4.5%.
While Rams­den sig­nalled that he would vote for rates to increase when the
MPC meets again next month, he became the latest com­mit­tee mem­ber to
high­light risks that an over­tight­en­ing of policy could lead to a deep reces­sion.
At the com­mit­tee’s Novem­ber meet­ing, only seven of the nine MPC mem­bers
backed a 0.75-per­cent­age-point increase, with Sil­vana Ten­reyro and Swati

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11/25/22, 11:16 PM Base rate can be cut if eco­nomy needs it, says Bank poli­cy­maker

Dhin­gra vot­ing for smal­ler rises.

Signs that the US Fed­eral Reserve plans to slow the pace of its interest rate
increases next month weakened the dol­lar and pushed the pound to above
$1.20 yes­ter­day, its highest level in three months.

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