Bank of England’s Taylor says rates set to fall further as inflation drops
Interest rates set by the Bank of England should continue to fall as inflation is likely to settle around the central bank’s 2 per cent target soon, BoE policymaker Alan Taylor said on Wednesday.
“We can now see inflation at target in mid-2026, rather than having to wait until 2027 as in our previous projection,” Taylor said in the text of a speech he was due to give at the National University of Singapore.
“I see this as sustainable, given cooling wage growth, and I now therefore expect monetary policy to normalise at neutral sooner rather than later….Interest rates should continue on a downward path, that is if my outlook continues to match up with the data, as it has done over the past year.”
Taylor was part of a five-strong majority on the central bank’s Monetary Policy Committee that approved a cut in the BoE’s benchmark interest rate to 3.75 per cent from 4 per cent in December. The other four MPC members favoured no change to borrowing costs.
BoE Governor Andrew Bailey has said inflation – which stood at 3.2 per cent in its most recent reading – could fall to around 2 per cent in April or May this year. Investors are close to pricing two further quarter-point rate cuts by the BoE in 2026.
In his speech on Wednesday, Taylor focused on the outlook for global trade which he expected to recover in the long run from shocks in recent years including U.S. President Donald Trump’s import tariffs, helping to reduce inflation pressures.
“Smoother international trade is, at the end of the day, a positive supply shock – for those countries who choose to participate, at least,” he said.