On Monday, Deputy Governor Ben Broadbent of the Bank of England hinted that the central bank could potentially lower interest rates in the coming months, contingent upon the gradual easing of the knock-on effects on wage growth and prices resulting from the surge in inflation observed in 2022.

In his remarks ahead of his final vote in June as a member of the Monetary Policy Committee (MPC), Broadbent referred to survey data from companies, indicating that a significant contributor to inflationary pressures—robust wage growth—was expected to recede at a slow pace. Despite this, Broadbent expressed optimism as prices were now increasing at a slower rate than wages, aiding households in recovering ground lost during the period of heightened inflation.

Broadbent emphasized the importance of reducing the persistence of inflation pressures embedded in the Bank of England’s latest forecasts, suggesting that if economic conditions continue to align with these forecasts—indicating a need for less restrictive monetary policy—there could be a possibility of a Bank Rate cut during the summer.

Earlier this month, the MPC voted 7-2 to maintain interest rates at a 16-year high of 5.25%, with Broadbent among the seven members favoring unchanged policy. He noted varying views within the MPC regarding the threshold of evidence required to justify rate cuts, citing cautiousness stemming from recent economic experiences.

As Broadbent prepares to step down from his role as deputy governor for monetary policy at the end of June, he stressed the importance of preserving the Bank of England’s operational independence, especially if the economy faces more frequent shocks to its supply side.

Against the backdrop of soaring inflation and criticism from some members of Prime Minister Rishi Sunak’s Conservative Party, Broadbent underscored the significance of maintaining the current framework of operational independence for the Bank of England.

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