In a speech, BoE dove Michael Saunders said the UK economy has “remained sluggish”. The “most likely outlook ” is a “further period of subdued growth” and hence, a “disinflationary backdrop of a persistent – albeit modest – output gap”. Additionally, neutral rate may have fallen further over the last year or two, both in UK and externally.
Therefore, “against this backdrop, it probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the 2% inflation target.”
Also, “with limited monetary policy space, risk management considerations favour a relatively prompt and aggressive response to downside risks at present.”
