No rate cuts until we beat inflation, says departing Bank of England hawk Jonathan Haskel

By John-Paul Ford Rojas

Updated: 22:01 BST, 8 July 2024

Interest rates should be left on hold until there is more evidence inflation is back under control, a key Bank of England official said yesterday.

Jonathan Haskel’s comments are the first from any member of the Bank’s nine-member Monetary Policy Committee (MPC) after a period of purdah since the general election was called.

Rates remains at a 16-year-high of 5.25 per cent and markets expect it to be cut at next month’s MPC meeting after inflation fell to its 2 per cent target.

Hawk: Bank of England rate-setter Jonathan Haskel (pictured) said the decline in inflation to its 2% target was temporary

But Haskel said: ‘I would rather hold rates until there is more certainty that underlying inflationary pressures have subsided sustainably.’ 

The comments failed to shift market expectations of a rate cut, with traders seeing a 60-40 chance that the Bank will move on August 1.

At the previous MPC meeting in June, officials decided against a pre-election cut but strongly hinted that an August move could be in the offing.

That would provide a boost for millions of borrowers just weeks into the new Labour government.

It comes after a prolonged battle to bring inflation down after it hit a four-decade high of 11.1 per cent – and some argue that it is too soon to declare victory. 

Haskel and his MPC colleague Catherine Mann have taken a hawkish view, and continued to vote for hikes until February this year, months after most decided to put them on hold last summer.

In a speech at King’s College London yesterday, Haskel – who is due to leave the Bank after August’s meeting – conceded there were ‘considerable encouraging signs’ on inflation.

However – as the Bank’s forecasts suggest – he said the decline in inflation to its 2 per cent target was temporary. 

Haskel said the ‘wage-price system’ – that is the way in which higher wages and prices can cause each other to push higher – had seen ‘a sequence of enormous shocks over recent years’.

That, together with ‘second-round’ effects – where previous inflation creates higher wages and this feeds into a further round of higher prices – could push inflation higher.

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No rate cuts until we beat inflation, says departing Bank of England hawk Jonathan Haskel

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