BoE's Ramsden sees risks to UK inflation as 'two-sided'

(Sharecast News) - Bank of England deputy governor Dave Ramsden said risks to hitting the bank's 2% inflation target as "two-sided" arguing for a "gradual and careful" approach to interest rate cuts, although the pace of these did not have to be slow. In a speech at South Africa's Stellenbosch University's Bureau for Economic Research, Ramsden said he was "less certain than I was about the outlook for the UK labour market, and its implications for future inflation persistence and growth".

"Because of the evidence of recent months I no longer think that risks to hitting the 2% inflation target sustainably in the medium term are to the downside," he said.

"Instead, I think they are two sided, reflecting the potential for more inflationary as well as disinflationary scenarios. I do, though, think the core disinflationary process remains intact."

"Given the increased uncertainty and risks to inflation on both sides - from the near-term outlook to inflation, and from developments in the global economy - I am even more certain than I was that taking a gradual and careful approach to the withdrawal of monetary restraint is appropriate."

UK inflation is expected to rise to around 3.7% later this year and fall back to close to the 2% target by 2027.

Ramsden voted with the majority of the BoE's Monetary Policy Committee to cut its main interest rate to 4.5% from 4.75% on February 6.

"There may be circumstances when a slower than expected descent is justified but there will also be times when conditions require that the pace has to quicken," Ramsden added.

Reporting by Frank Prenesti for Sharecast.com