BoE Monetary Policy Committee member Silvana Tenreyro, a known dove, remarked in a speech that the data sinve November has evolved most like her downside scenario, noting a sharp decline in high-frequency private-sector regular pay growth.
She explained that with the Bank Rate at 4.25%, the restrictive policy is likely to “drag demand well below its potential, loosening the labour market and pulling down on inflation.” As a result, she believes that “inflation is likely to fall well below target.”
Tenreyro voted for no change in the Bank Rate in recent months, instead of further tightening, as she believes a looser stance is necessary to achieve the inflation target in the medium term.
She expressed her expectation that the current high level of the Bank Rate “will require an earlier and faster reversal, to avoid a significant inflation undershoot.”
Full speech of Silvana Tenreyro here.
