The Bank of England must move quickly to cut interest rates “preemptively” because the UK is “in the last half mile of inflation,” Bank of England (BoE) policymaker Alan Taylor said on Wednesday.
Key quotes
“For now, I think it makes sense to pre-emptively lower interest rates to have a bit of insurance against this change in the balance of risks, given that our key interest rate is still well above neutral and will remain very restrictive.”
“We are in the last half mile on inflation, but with the economy weakening, it is time to bring interest rates back to normal to maintain the soft landing.”
“It is this logic that convinced me to vote for a rate cut in December.”
“On multiple fronts, UK businesses and households may face pressure on cash flow in the near term, and we need to monitor this important potential downside.”
“I fully appreciate these challenges for businesses and households and the headwinds they pose to the UK economic outlook, alongside all the other emerging downside economic risks in the UK and around the world.”
Market reaction
The GBP/USD pair is trading 0.03% lower on the day at 1.2239, as of writing.
The balance of trade, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can affect the value of the Australian dollar.