Bank of England Deputy Governor Dave Ramsden said in a speech to the Money, Macro and Finance Society on Monday that keeping Bank Rate unchanged since March has itself amounted to a tightening relative to the easing path he had expected before the Iran war. Ramsden voted with the 6–3 majority to hold Bank Rate at 3.75% in September, but noted that before the Middle East conflict he had expected at least two cuts by now. “My holds to Bank Rate since March have effectively delivered a tightening relative to where I thought we might otherwise have been,” he said. He added that the tightening in financial conditions since the conflict began had helped limit the risk that the energy shock would propagate into second-round inflation.
At the same time, Ramsden made clear that the BoE is trying to move quantitative tightening into the background. The Bank’s new multi-year plan will unwind the remaining monetary-policy gilt portfolio by end-2034, with £20bn of annual sales, while £222bn of gilts are allowed to mature and £120bn of long-dated gilts remain to back banknote issuance. Ramsden said the package had been “well understood and well received,” and argued that removing uncertainty over the pace and endpoint of QT should allow the path to be embedded more cleanly into financial conditions. The market reaction supports that interpretation: 30-year gilt yields fell around 10bp after the announcement, while the 10-year term premium declined around 7bp. Ramsden said this suggested markets had expected “more QT, either in total or at a higher pace,” while lower uncertainty may also have reduced risk premia.
On Bank Rate, however, Ramsden’s tone has clearly shifted in a more hawkish direction relative to his earlier preference for cuts. He said risks to the inflation outlook have “tilted more to the upside” and warned that “were upside pressures on the inflation outlook to continue to build, there could be a case for increasing Bank Rate.” He is watching energy prices, extreme weather, AI supply-chain pressures, domestic food prices and early signs of second-round effects in wage setting. The best characterization is therefore conditional hawkish bias, not an outright call for an immediate hike: Ramsden still regards the current stance as restrictive, but the direction of risk has shifted from expected easing toward the possibility of renewed tightening if inflation pressures broaden further.
Key Takeaways
- Ramsden sees unchanged rates as effective tightening relative to his earlier baseline. Before the Iran conflict, he had expected at least two cuts by now. Keeping Bank Rate at 3.75% instead has, in his words, “effectively delivered a tightening relative to where I thought we might otherwise have been.”
- The BoE wants QT to become predictable enough to fade into the background. The new multi-year strategy fixes annual gilt sales at £20bn and aims to complete the monetary-policy unwind by end-2034, allowing Bank Rate to remain the primary active policy tool.
- Markets had apparently expected a more aggressive QT path. Ramsden noted that 30-year gilt yields fell around 10bp after the announcement and said investors may have expected “more QT, either in total or at a higher pace.” He also suggested greater certainty may have reduced risk premia.
- His rate stance has shifted in a hawkish direction relative to his earlier preference for cuts. Ramsden said inflation risks have “tilted more to the upside” and that further pressure could create a case for raising Bank Rate.
- The hawkishness is conditional, not a call for an immediate hike. Ramsden still regards the existing stance as restrictive and is watching whether energy, extreme weather, AI supply-chain costs, food prices and wage negotiations generate broader second-round inflation.
