Bank of England Rate Cuts "A Long Way Off" Says Haskel

Above: File image of Jonathan Haskel. Image copyright: Pound Sterling Live, Still Courtesy of Imperial College Business School.

The Bank of England still has some distance to go before cutting interest rates, says a member of the Monetary Policy Committee (MPC).

MPC member Jonathan Haskel warned that wage growth remained too high and that he would favour gradual rather than quick rate cuts.

"Although the fall in headline inflation is very good news, it is not informative about what we really care about: what we really care about is the persistent and the underlying inflation," Haskel said. "I think cuts are a long way off."

Haskel voted for an interest rate hike in February but dropped his vote in March, something markets interpreted as a sign the Bank could cut interest rates as soon as June.

Indeed, one major investment bank says a May rate cut is possible. Expectations for an early rate cut were boosted by Governor Andrew Bailey's comments following the March MPC update that all meetings are "in play" for a rate cut.

But Haskel said the Bank should not rush to cut rates with wage growth still too high.

On Tuesday, Catherine Mann, another MPC member who voted for a rate hike in February, said markets are pricing in "too many rate cuts" from the Bank.

Money market pricing shows 70% odds of a cut on June 20, down from 85% at the start of this week - likely a result of Mann and Haskel's comments - but up from 50% at the start of last week.

A total of three cuts in 2024 are still priced in.

Steadying expectations for the outlook for UK interest rates will underpin the Pound, which remains one of 2024's best-performing currencies.