Bank of England’s deputy governor, Sir Dave Ramsden, has highlighted the risks of inflation running over target and the potential for more inflationary scenarios in the UK economy. Speaking at the Bureau for Economic Research in South Africa, Ramsden is now less certain about the outlook for the UK labor market, as evidenced by accelerating wage growth of 6% at the end of last year.
Ramsden advocated for a gradual and careful approach to interest rate cuts, given the uncertainties surrounding inflation and weak growth. Despite this, he did not rule out sharper cuts if needed. The Bank of England had already lowered interest rates to 4.5% earlier this month.
Ramsden’s concerns about the risks of slowing wages led him to vote for a rate cut in December 2024. However, his stance was in the minority as he, along with two other policymakers, were outvoted by the majority.
In light of global trade uncertainties, Ramsden also warned that uncertainty over trade policy could already be impacting the UK economy. He noted heightened geopolitical uncertainties and uncertainty regarding the next steps of the US administration with regards to tariffs.
In other economic news, UK lender Nationwide reported solid house price growth in February, with prices rising by 0.4% for the month. This marks the sixth consecutive monthly rise in house prices, although the annual rate of growth dipped to 3.9% for the year to February. The housing market activity has remained resilient despite ongoing affordability challenges, with a noticeable pick-up in total housing transactions in the second half of 2024.
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