Swati Dhingra, an external member of the Bank of England’s Monetary Policy Committee (MPC), stated late Monday that the current level of monetary policy restrictiveness is already at a “high level,” implying that further significant tightening may not be necessary.
Dhingra highlighted that medium-term inflation pressures are beginning to ease, despite some ongoing challenges in food prices. However, the UK is not experiencing the same rise in import costs seen earlier, which is contributing to the easing trend.
One of the key observations Dhingra made was regarding the UK’s unusually weak consumption, especially when compared to the rest of Europe. She noted that the country’s high savings rate is likely contributing to the sluggish consumption spending, which is not acting as a growth driver in the UK as it is in the US and Eurozone.
Dhingra pointed out that the levels of capacity utilization in the UK suggest that weak demand, rather than supply-side issues, is the primary issue. She also noted that there is a divergence in how MPC members interpret the pace of potential rate cuts. While Dhingra’s view on gradual rate cuts does not necessarily imply a 25-basis-point reduction each quarter, she emphasized that even with such a pace, rates would likely remain restrictive throughout the year.
Regarding wage growth, Dhingra expressed some uncertainty, citing the lack of convergence between self-employed workers and small businesses in the data.
In summary, Dhingra’s comments suggest that the current monetary policy stance is restrictive enough to manage inflationary pressures, but more clarity on consumption and wage growth will likely shape future decisions on rate cuts.
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