BoE Deputy Governor Ramsden maintained a cautious stance on monetary policy, saying he does not foresee the need for further quantitative easing anytime soon while stressing that the inflation outlook has tilted more to the upside.
As a reminder, the BoE held the Bank Rate at 3.75% last week by a 6–3 vote, with three members voting for a 25 bps hike. The MPC highlighted the sharp rise in energy prices caused by the prolonged Middle East conflict and warned that inflation could rise to around 3.75% in Q4 2026 and slightly above 4% in Q1 2027 if current energy prices persist. The Bank also said the longer elevated energy prices last, the greater the risk of second-round effects through wages and prices.
Ramsden’s focus is centred on the energy shock and its potential spillovers. He said he is watching external pressures from energy prices, weather and supply chains, while domestically he is monitoring food prices and wage settlements for signs that the initial energy shock is becoming embedded. At the same time, he noted that there is little evidence of significant second-round effects so far, and that food-price inflation has been weaker than expected.
He’s not calling for tighter policy just yet but keep in mind that Ramsden has generally been among the more dovish members of the MPC, so less hawkish comments shouldn’t be a surprise.
Ramsden said the current stance remains restrictive, but if upside inflation pressures continue to build, there could be a case for raising the Bank Rate. This is broadly consistent with the latest MPC communication, which kept rates unchanged while acknowledging that the balance of risks has shifted further toward inflation.
Markets are already assigning roughly an 85% probability to a BoE hike at the upcoming meeting, so the immediate question is less whether the risk exists and more whether the energy shock becomes persistent enough to generate the second-round effects policymakers are watching and lead to more rate hikes than expected.
Looking ahead, continued elevated oil and gas prices would keep the BoE on a tightening bias, while a meaningful easing in the Middle East situation should reduce the pressure on the central bank.
This article was written by Giuseppe Dellamotta at investinglive.com.