LONDON (dpa-AFX) - Bank of England's Deputy Governor Ben Broadbent said the interest rate could be cut some time over the summer.
The outgoing deputy governor said if things continue to evolve as expected, then the policy will have to become less restrictive at some time.
He observed that the direct effect on inflation of the pandemic and the Ukraine war has faded. The economy is undergoing more persistent, second-round effects of earlier surge on domestic inflation, Broadbent noted.
'However, how long these persist is unclear,' said Broadbent.
The unwinding of the inflationary shock is likely to be asymmetric and it means that second-round effects in domestic prices and wages will take longer to unwind that they did to emerge, the banker added.
Bank's agents reported that firms fell less able than they did last year to pass through in full higher wage costs.
'And if the origin of these second-round effects is the squeeze in real incomes in 2022, their recovery this year may matter,' Broadbent said. 'The more that's regained, the less ground, relative to some notional 'norm', there is to make up,' he added.
At the May monetary policy committee meeting, policymakers left the key rate unchanged for the sixth consecutive meeting and signaled that the first rate cut since 2020 is on the horizon.
The bank rate currently stands at 5.25 percent, the highest since early 2008.
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