Bank of England Officials Warn on Inflation Risks

Bank of England officials are expressing caution regarding the impacts of the recent budget on inflation and interest rates. Governor Andrew Bailey highlighted uncertainty over how tax increases on employers will affect consumer prices and employment, leading to a raised inflation forecast despite a recent rate cut to 4.75%. MPC member Alan Taylor noted that while the market anticipates about four rate cuts by the end of 2025, this will depend on economic conditions, which may lead to quicker adjustments if downside risks materialize. Megan Greene, another MPC member, emphasized the persistent high services inflation and wage growth that exceed the 2% target, advocating for a gradual approach to rate cuts to avoid premature easing. The interplay of external economic conditions, especially from the U.S., is also influencing the UK’s inflation trajectory. Overall, officials are wary of aggressive rate cuts amid ongoing inflation pressures and external vulnerabilities.