In a speech today, BoE Deputy Governor Ben Broadbent indicated that if current forecasts hold, which suggest that monetary policy will need to become “less restrictive at some point”, a rate cut could occur “over the summer”.
Broadbent noted that the direct impact of the pandemic and the war on inflation has now diminished. What remains are the “more persistent second-round effects” on domestic inflation stemming from these earlier shocks.
He emphasized the uncertainty surrounding how long these effects will persist. While a symmetrical process might suggest a quick unwinding within the next year, the Committee has consistently judged that the process is likely to be “asymmetric”. As stated in recent Monetary Policy Reports, “second-round effects in domestic prices and wages will take longer to unwind than they did to emerge.”
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