A prominent member of the Bank of England’s Monetary Policy Committee, Dave Ramsden, has voiced increased optimism regarding the UK’s inflation trajectory, hinting that it might settle at the target rate for a prolonged period, outperforming the central bank’s predictions.
Ramsden pointed out the UK’s transition from an “outlier” to a “laggard” in terms of inflation, suggesting a slow convergence with international patterns observed in the US and eurozone markets. The latest data from the Office for National Statistics (ONS) shows that Consumer Prices Index (CPI) inflation fell to 3.2 percent in March.
Although the Bank of England’s February projection foresaw a reversion to the two percent CPI inflation target from April to June this year, it also warned of the transitory nature of this equilibrium, with an anticipated rise in the second half of the year, possibly hitting 2.8 percent by the beginning of 2025.
In a speech at the Peterson Institute of International Economics in Washington DC, Mr Ramsden expressed his growing optimism. He stated that recent months have reinforced his belief that the risk of persistent high inflation in the UK is lessening.
He said, “For me the balance of domestic risks to the outlook for UK inflation, relative to the February MPR (Monetary Policy Report) forecasts, is now tilted to the downside, with a scenario where inflation stays close to the two percent target over the whole forecast period at least as likely,” reports the Mirror.
The Bank’s forecast spans the next three years. “This leaves the UK as less of an outlier and more of a laggard in terms of recent inflation performance, and one that is now catching up quickly,” he added.
The Monetary Policy Committee (MPC) will convene its next meeting in May, but it is not expected to start reducing interest rates until later in the summer. After being hiked by the Bank of England to tackle inflation, rates are currently at a 16-year peak of 5.25 percent.
