Monetary policy official advocates for reduction in benchmark lending rate at Bank of England
A Bank of England rate-setter, Alan Taylor, dismisses the recent surge in inflation and insists on cutting interest rates further.
Taylor asserts that the latest inflation flare-up stems from "one-off factors" linked to international trade issues, specifically President Donald Trump's trade war. While he welcomes recent trade deals between the UK and the US, EU, he cautions they impact only limited aspects of the country's overall trade practices.
In a conversation with the Financial Times, Taylor didn't disclose his upcoming vote but hinted at his dissent in previous meetings, emphasizing his preference for a lower interest rate policy path. He expressed concerns about escalating risks on the downside due to global developments, labeling Trump's trade conflicts as a "drag on growth."
Recent data reveals that UK growth in the opening quarter of the year was stronger than anticipated, with an increase of 0.7% in the GDP. Yet Taylor remains anxious about the economy's trajectory.
The Bank of England lowered interest rates to 4.25% in its last meeting this month, a move that exposed disagreements within the nine-member panel. Taylor and Swati Dhingra fought for a half-point cut, while Huw Pill and Catherine Mann worried about lingering inflation.
Recent statistics indicate that inflation shot up to 3.5% in April as a result of employers facing higher costs due to Chancellor Rachel Reeves' tax hikes.
Taylor believes that the inflation hike isn't a consequence of demand and supply pressures but rather "one-time tax and administered price changes," pointing towards regulated price increases such as water bills and energy caps as principal forces behind the inflation surge.
The Bank of England's forecast suggests that inflation will spike and then subside, according to Taylor.
The surge in inflation, as highlighted by Taylor, is attributed to one-off factors linked to international trade issues and tax hikes, suggesting that it might not be a result of demand and supply pressures in the economy. Taylor's concerns about the UK economy's trajectory may also extend to the business sector, as he anticipates potential risks arising from global developments and fiscal policies, such as the impact of taxes on businesses.
