Investing.com — Bank of England policymaker Alan Taylor said Thursday that interest rate increases would only be justified under the worst-case Iran scenario, arguing that the current 3.75% rate is restrictive enough to control inflation.
Taylor, one of the Monetary Policy Committee’s most dovish members, said keeping rates on an extended hold remains appropriate as the UK faces heightened recession risks from the Middle East conflict.
The economy is showing signs of weakness, with contracting private sector activity, soft inflation data, and a weakening jobs market that is helping prevent a repeat of the 2022 inflationary spiral, Taylor noted.
Current rates stand 100 basis points above the 3% neutral rate, Taylor said. While he previously supported faster rate cuts before energy prices surged, he now favors a cautious wait-and-see approach rather than overreacting to developments.
Taylor downplayed the likelihood of the Bank of England’s worst-case economic scenario materializing, where inflation would reach 6.2% by 2027, stating those risks are far from certain.
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