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Bank of England policymaker warns of 'heightened risk of inflation escalating'
Dave Ramsden, who is the bank's deputy governor for markets and banking, pointed to the combination of rising inflation and weak economic growth.
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Dave Ramsden, who is the bank's deputy governor for markets and banking, pointed to the combination of rising inflation and weak economic growth.Bank of England deputy governor for markets and banking Dave Ramsden (
Image: PA Wire/PA Images)
Bank of England policymaker Dave Ramsden has endorsed the Bank's "gradual and careful" approach to rate cuts amid "increased uncertainty" in the economy.
Speaking in South Africa on Friday, Mr Ramsden, who serves as the bank's deputy governor for markets and banking, highlighted the mix of rising inflation and sluggish economic growth. Although the Bank cut interest rates to 4.5% during its February meeting, prospects for further reductions were dampened following higher-than-anticipated inflation figures in subsequent weeks.
The core inflation rate across the economy climbed to 3% in January, up from 2.5% in December. While Mr Ramsden didn't rule out additional cuts, he acknowledged that there's a heightened risk of inflation escalating compared to before.
He remarked: "Given the increased uncertainty and risks to inflation on both sides ... I am even more certain than I was that taking a gradual and careful approach to the withdrawal of monetary restraint is appropriate."
Mr Ramsden referred to a recent employment market report showing earnings growth reaching an eight-month peak, with regular pay growth surging to 5.9% in the three months leading up to December. He said he is "less certain than I was about the outlook for the UK labour market, and its implications for future inflation persistence and growth".
The Bank aims for inflation across the entire economy to revert to its 2% target over the next few years, with rising wage growth posing a potential obstacle to this goal.
Inflation threats are now "two-sided, reflecting the potential for more inflationary as well as disinflationary scenarios" he remarked. Mr Ramsden, serving as the bank's deputy governor for markets and banking, continued: "I do, though, think the core disinflationary process remains intact."
Yet, he didn't rule out the possibility of quicker reductions, comparing it to descending a mountain and noting that it "doesn't always mean the descent has to be slow".
"There may be circumstances when a slower than expected descent is justified but there will also be times when conditions require that the pace has to quicken," he elaborated. This statement follows governor Andrew Bailey's earlier warning in February about the UK facing a "weak growth environment" amidst possible "global fragmentation" of the world economy.
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