A Bank of England deputy governor is banging the drum for taking a “gradual and careful approach” to interest rate cuts, given the twin threats of inflationary pressures and weak growth.
However, Sir Dave Ramsden is not ruling out sharper cuts, if needed, while also flagging a rising risk that inflation could run over target.
Ramsden has been speaking at the Bureau for Economic Research at South Africa’s Stellenbosch University, and he revealed he was now “less certain” that the UK labour market would continue to cool, easing inflationary pressures.
Ramsden said: "Because of the evidence of recent months, I no longer think that risks to hitting the 2% inflation target sustainably in the medium term are to the downside.
"Instead, I think they are two-sided, reflecting the potential for more inflationary as well as disinflationary scenarios. I do, though, think the core disinflationary process remains intact."
Ramsden notes that UK inflation rose to 3% in January, adding: "UK inflation is expected to rise in the short-term to around 3.7% and is then forecast to fall back to close to the 2% target in the second half of the forecast period."
That change of mind follows the latest unemployment report, which showed that UK wage growth accelerated to 6% at the end of last year – three times as fast as the Bank’s 2% inflation target.
Those fast-rising earnings could deter Bank policymakers from cutting interest rates swiftly during 2025 – it has already made one cut, earlier this month, bringing the bank rate down to 4.5%.
The UK lender Nationwide is reporting that house price growth “remains solid in February”.
Nationwide’s latest house price report shows that prices rose by 0.4% this month, up from the 0.1% rise reported in January, and the sixth monthly rise in a row.
However, the annual rate of house price growth dipped to 3.9% for the year to February, compared with 4.1% in January.
Robert Gardner, Nationwide’s chief economist, said: “Housing market activity has also remained resilient in recent months, despite ongoing affordability challenges. Indeed, the second half of 2024 saw a noticeable pickup in total housing transactions, which were up 14% compared with the same period in 2023.
"However, taking 2024 as a whole, transactions were still modestly (6%) lower than the levels prevailing before the pandemic struck in 2019."
The agenda
• 1pm GMT: German inflation report for February
• 1.30pm GMT: US PCE inflation measure for January
We'll be tracking all the main events throughout the day … |
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