Bank of England Taylor says now is the time to cut interest rates.

By Andy Bruce

LEEDS, England (Reuters) – The Bank of England should move quickly to cut interest rates given signs of a slowdown in Britain’s economy, the BoE’s most recently appointed interest rate setter, Alan Taylor, said on Wednesday.

Economics professor Taylor voted to cut rates in November – when the Bank rate was cut from its current 4.75% – and again in December when the Monetary Policy Committee left most of it unchanged.

“We are in the last half mile of inflation, but as the economy continues to weaken, now is the time to return interest rates to normal to maintain a soft landing,” Taylor said in a speech to be given at the University of Leeds.

“That’s the logic that convinced me to vote for interest rates in December.”

The BOE has cut its benchmark interest rate twice since August – fewer than any other central bank – and has stressed that it may move more slowly on interest rates in the future due to persistent inflationary pressures in the British economy.

Taylor said he thought concerns around inflation had shifted over the past 12 months, slowing faster than expected in 2024.

By the time Taylor’s speech was published, sterling had fallen against the dollar, losing about a third.

Data published earlier on Wednesday showed British inflation eased to 2.5% in December, down from 2.6% in November, and the BOE’s closely watched gauge of price growth eased faster.

Taylor said that while the risks to inflation appear to be receding, the likelihood of a slowdown in Britain’s economy has increased and, although it is not a fundamental issue, it is appropriate to cut prices in response.

“Currently, I think it is reasonable to lower rates in advance to take a little insurance on this change in risk balance, as our policy rates are still above neutral and still remain very restrictive”.

(Additional reporting by Suban Abdullah and William James in London Writing by William Schomberg)