Sign in Subscribe
Banks (Finance)

Sticky Inflation Threatens Further Interest Rate Cuts in UK

Strategic Insights

— 1 min read

Bank of England policymakers have raised concerns that persistently high inflation could slow down interest rate cuts this year. Deputy Governor Clare Lombardelli and MPC members Megan Greene and Catherine Mann have expressed concerns about the upside risks of inflation. Lombardelli highlighted high wage growth as a key driver of underlying inflation, while Greene suggested that inflation could not be seen as "transitory" given Britons' expectations of prices rising. External member Mann voted for interest rates to be held, despite calling for a 50 basis point cut at a previous decision.

Key Takeaways:

  • The Bank of England's Monetary Policy Committee (MPC) members have warned that sticky inflation could stall further interest rate cuts this year.
  • Two MPC members, Deputy Governor Clare Lombardelli and London Business School lecturer Megan Greene, voted for a 25 basis point cut, while another couple voted for rates to be held.
  • Greene and Lombardelli expressed concerns about the upside risks of inflation, with Lombardelli highlighting high wage growth as a key driver of underlying inflation.
  • External member Catherine Mann voted for interest rates to be held, citing the risk of volatility on people's expectations of prices surging.
  • The MPC members are concerned that persistently high inflation could slow down the Bank's rate-cutting cycle.

Statistics:

  • The Bank of England's interest rate is currently at 4.25 per cent.
  • Inflation in February was 5.9 per cent.
  • The Bank of England has cut interest rates four times since its rate-cutting cycle began in mid-2022.
  • The peak inflation rate was 11 per cent in October 2022.

Sources:

  • "Monetary Policy Report" (Bank of England, May 2025)
  • "Quicker interest rate cut hopes fade after Bank of England decision" (City A.M.)
  • "Exclusive: Former Bank of England policymaker calls for interest rates to be held amid high inflation" (City A.M.)
  • "Words matter more than numbers at the Bank of England" (City A.M.)

Read more