A rate-setter at the Bank of England said he wanted to see “more evidence” that inflation was falling to the two per cent target before changing his policy stance.
Jonathan Haskel, one of two members of the Monetary Policy Committee to back a further hike last week, said he was not yet convinced that inflation was on track to fall sustainably to two per cent.
In an interview with Reuters, Haskel said “the signs that we’ve seen thus far are encouraging. I don’t think we’ve seen quite enough signs yet”.
Having peaked at over 11 per cent, inflation has fallen sharply to four per cent at the end of last year. The latest Bank of England forecasts suggest it will touch two per cent in the second quarter of 2024, although it will then pick up again slightly.
However, gauges of domestic inflation indicate more persistent price pressures. Services inflation, for example, rose to 6.4 per cent in December from 6.3 per cent the year before.
Wage growth also remains too strong to be consistent with the two per cent inflation target, policymakers warn.
Haskel said his decision had been “finely balanced” but he would “wait a bit longer to accumulate more evidence on that persistence.”
“I’m not going to apologise for banging on about persistence because I think we’re right to,” Haskel said.
In a speech yesterday, Catherine Mann, who also backed another rate hike, warned that demand could pick up again later in the year stoking inflationary pressures.
“Against a backdrop of sluggish supply growth and possible upside shocks, I see risks of continued inflation momentum and embedded persistence,” she warned.
The comments come a week after the Bank of England voted to leave interest rates at 5.25 per cent for the fourth consecutive meeting.
Although interest rates were left on hold, MPC members have signalled that rate cuts are in the offing. Earlier this week, Huw Pill, the Bank’s chief economist, said that cuts were a “when rather than an if”.