Bank of England policymaker Alan Taylor said Tuesday he does not see a compelling case to raise interest rates, casting doubt on whether a single hike could work as intended. He also said the recent surge in energy prices alone isn't enough to justify tightening.
Taylor, a member of the BoE's Monetary Policy Committee, was part of the 6-3 majority that voted this month to hold the bank rate at 3.75%. Some of his colleagues have argued for a single quarter-point hike now, reasoning it could reduce the need for heavier tightening later. Taylor pushed back on that logic Tuesday.
Single hike seen as impractical
Taylor said it was unclear a single move would stay contained, warning it could be read by markets as the start of a longer tightening cycle rather than a one-off. He pointed to March, when the BoE's decision to hold rates was already misinterpreted as a prelude to multiple hikes this year.
According to Reuters: "If you did that, would people say: 'You're off to the races!'" Taylor said, pointing to how markets could read a single move.
Energy prices alone won't move the needle
Separately, Taylor said the case for further rate hikes stays weak until high energy prices show clearer signs of spreading through the wider economy. He noted the recent jump in gas and oil prices could still push headline inflation notably higher this winter.
But he said evidence of second-round inflation effects remains scant, pointing to food inflation running slower than expected and underlying pay growth staying consistent with on-target inflation. Taylor made the remarks in a lecture to Britain's National Institute of Social and Economic Research.
He had written in the minutes of this month's rate decision that he wanted clear evidence second-round effects were underway before backing a hike. Tuesday's comments repeated that same threshold, unchanged.
Sources: Economy News, Economy News
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