Bank of England (BoE) rate-setters have revealed themselves to be on opposite sides on the outlook for interest rates, as the Monetary Policy Committee (MPC) prepares to decide next week whether to cut borrowing costs again.
The committee voted 5–4 in November to maintain the Bank Rate at 4%, a split that has carried over into the latest round of testimony. Deputy governor Clare Lombardelli, who backed holding rates, stressed that she remains more concerned about upside risks to inflation. “I am very worried that we are seeing more pressure on resources in the economy, and that obviously leads to price rises. I think you can see it in the labour market,” she told the Treasury Committee.
She added she was “less convinced than others [on the Monetary Policy Committee] about how restrictive monetary policy is at the moment, as in how far we are from reaching the end of the cutting cycle”.
Lombardelli said policymakers may need to slow the pace of rate cuts as they approach the end of the cycle. “And you don’t know where it is, you might slow down a bit to try and anticipate and find your way a bit more.”
By contrast, deputy governor Dave Ramsden renewed his call for a cut, arguing that disinflation remained on track and that the risks to the inflation outlook were increasingly balanced. “I see the risks around the central projection for inflation returning to target at the start of 2027 as pretty balanced, but for me…I think the downside risks of inflation coming in below target over that horizon were more apparent compared to where they were in August,” he said. He added there was “no evidence that inflation was not going to fall as the BoE expects”.
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In a written report released earlier on Tuesday, Ramsden warned that the effects of monetary policy would become harder to discern as rates approached the economy’s neutral level. “I therefore think a gradual removal of policy restraint remains appropriate, allowing the MPC to assess carefully the balance of risks to inflation as the evidence evolves.” he wrote.
Financial markets now assign an 88% probability to a December rate cut, following data showing a further easing of price pressures.
Other committee members also highlighted diverging priorities. Swati Dhingra, who supported a cut in November, said she remained concerned about food inflation but that the broader disinflation process was intact. She noted that recent divergences from the euro area were driven by a small number of imported items, with chocolate among the biggest contributors.