Bank of England policymakers are clashing over whether “gradual” base rate reductions should limit them to one cut every three months, said Monetary Policy Committee member Swati Dhingra.
Long-time dove Dhingra said: “I know ‘gradual’ has been interpreted in the media as 25 basis points per quarter. That’s not actually what the committee has said.”
The external Monetary Policy Committee member’s comments come from a speech yesterday given at Birkbeck, part of the University of London.
“I think everybody has a different definition. That’s not my definition, clearly.”
Dhingra has voted nine times to cut rates since her first vote on the nine-strong committee in September 2022, more than any other member.
She said a key difference among the committee members was how much of Britain’s weak economic growth reflected low demand that could be boosted by rate cuts, rather than a lack of supply capacity which would point to latent inflation pressures.
“That’s where the real … disagreements are,” she said. “From my point of view, I think a lot of it is actually demand, that demand is generally weak.”
“That consumption weakness is just not going away … and I think that’s the reason that I have been much more on the side of wanting to reduce the level of (monetary policy) restriction.”
Her comments come as regulator Ofgem raised the energy price cap on UK bills by 6.4% in April, lifting the average annual cost of electricity and gas for a typical household to £1,849 per year, up from £1,738.
This will add to inflation pressures, currently at 3%, which the central bank forecasts will rise to 3.7% in the third quarter of this year, before receding.
Earlier this month, the Monetary Policy Committee cut the base rate by 0.25% to 4.5% against signs that the UK economy is struggling.
Dhingra and Catherine Mann thought more help was needed and voted for a 0.5% cut.
Policymakers are weighing up whether the response to the rising cost of living, wage hikes and the threat of a global tariff war, should be to relax, or tighten, monetary policy.
Dhingra said: “That consumption weakness is just not going away … and I think that’s the reason that I have been much more on the side of wanting to reduce the level of (monetary policy) restriction.”
Dhingra was also reappointed as an external member of the Monetary Policy Committee for a second three-year term, yesterday.
The associate professor of economics at the London School of Economics, who was first appointed in 2022 is now due to hold her post until August 2028.
Dhingra’s appointment was confirmed by Chancellor Rachel Reeves.
