Swati Dhingra, an external member of the Bank of England’s Monetary Policy Committee (MPC), stated on Monday that the current level of monetary policy restrictiveness in the UK is already “high,” signaling a cautious stance on further tightening.
Key Points from Dhingra’s Comments:
Monetary Policy Restrictiveness: Dhingra emphasized that the UK’s monetary policy is already at a high restrictive level, suggesting that the Bank is approaching the limits of its tightening cycle.
Inflation Outlook: While medium-term inflationary pressures are easing, Dhingra noted that food prices continue to rise, although the pace of import cost increases has slowed compared to previous months.
Weak UK Consumption: Dhingra highlighted unusually weak consumption in the UK, which contrasts with stronger spending patterns seen in other European nations. She attributed much of the UK’s economic weakness to subdued consumer spending, stating that unlike in the US or Eurozone, consumption is not driving growth in the UK.
Demand vs. Supply: Dhingra pointed to weak demand, rather than supply issues, as the primary cause of low levels of capacity utilization in the UK.
Rate Cut Outlook: Dhingra’s interpretation of “gradual” rate cuts differs from others on the MPC. She suggested that gradual rate cuts should not necessarily be 25 basis points per quarter, as this would still leave the policy in restrictive territory throughout the year.
Wage Data Concerns: Dhingra expressed uncertainty regarding wage data, particularly due to the lack of convergence between self-employed and small business wages.
Market Reaction: The British pound (GBP) saw little movement following Dhingra’s comments, trading 0.03% lower against the US dollar (USD) at 1.2620 at the time of writing.
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