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\t\tThe Bank of England is mulling over whether to make another interest rate cut in the coming months. \t<\/p>\n
The Bank of England is less likely to make drastic cuts to interest rates in the coming year as officials said the current cycle could \u201cnot go on forever\u201d.\u00a0<\/p>\n
In a hearing before the Treasury Select Committee, members of the Monetary Policy Committee (MPC) indicated markets may be correct to predict there would be no further cuts<\/a> this year. \u00a0<\/p>\n External member Megan Greene<\/a> said Bank officials disagreed on whether a neutral rate could be found, though she said fewer cuts would be made.<\/p>\n Greene said the rate-cutting cycle could \u201cnot go on forever\u201d as she said the Bank was \u201ccloser\u201d to its last cuts.\u00a0<\/p>\n Deputy governor Clare Lombardelli <\/a>said in a written note that the neutral rate was likely to be nearer the \u201cupper end\u201d of a range between two per cent and four per cent.\u00a0<\/p>\n Interest rates face uncertain path<\/p>\n Both rate-setters flagged concerns about price-setting behaviours given higher inflation expectations among businesses and consumers.<\/p>\n The risks to inflation expectations were more \u201csalient\u201d because of higher food price inflation, according to Greene.<\/p>\n The comments cast doubt on whether hawkish members would vote for further cuts in upcoming meetings, with both Lombardelli and Greene voting against consensus at a historic interest rate cut in August.\u00a0<\/p>\n Governor Andrew Bailey said there was more uncertainty \u201cexactly when and how quickly\u201d interest rate cuts would be made given fears of stubborn inflation in the UK economy.\u00a0<\/p>\n But Bailey highlighted further \u201cweakness in the labour market\u201d while fellow rate-setter Alan Taylor, who initially opted for a 50 basis point cut at the August meeting<\/a> before changing his vote to a 25 basis point cut, said easing wage growth would weigh down on price growth in the coming months.\u00a0<\/p>\n Bank of England fights high borrowing costs<\/p>\n The Governor also emphasised the higher borrowing cost to the government, shown by turmoil in bond markets, was not a problem unique to the UK.\u00a0<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tBank of England cuts interest rates in historic vote\u00a0<\/a><\/p>\n \u201cYou have seen a steepening of yield curves across the whole developed world.<\/p>\n \u201cThe underlying driver of this is global.\u201d<\/p>\n Bailey said he had not yet come to a decision on whether the Bank\u2019s quantitative tightening (QT)<\/a> programme would be paused next month as he said the central bank was not the cause of turmoil in the bond markets.\u00a0<\/p>\n The Bank\u2019s monetary policymakers said they would take QT\u2019s impact on public finances into account when it makes a decision on whether it sells gilts in the coming weeks.\u00a0<\/p>\n But Bailey pushed back on Labour MP Yuan Yang\u2019s suggestions, made based on a report by the IPPR<\/a>, that the Bank\u2019s programme was costing the government dozens of billions of pounds a year.<\/p>\n Bailey\u2019s defence of Federal Reserve<\/p>\n The Bank of England Governor\u2019s analysis of troubles in bond markets came as he launched a defence<\/a> of the independence of the Federal Reserve amid threats made by President Donald Trump<\/a>.\u00a0<\/p>\n \u201cThe Governor said he was worried about attempts to \u201ctrade off\u201d monetary and financial stability maintained by independent central banks.\u00a0<\/p>\n \u201cI\u2019m afraid I just think that is a very dangerous road to go down,\u201d Bailey said.<\/p>\n \u201cThe job of an independent central bank is to provide those foundations, to take independent decisions to do it.\u201d<\/p>\n \u201cThat\u2019s how it works, that\u2019s how it should work. Those are threats that I take very seriously.\u201d<\/p>\n \t\t\t\t\tRead more<\/p>\n