Bank of England’s Taylor urges extended hold on interest rates amid geopolitical risks
By Aboki Forex —
A Bank of England rate-setter has called for keeping interest rates unchanged until there is more clarity on the economic outlook. Alan Taylor, a member of the Monetary Policy Committee, said an “extended hold” is the right approach given current risks.
Speaking at the Barclays-CEPR Monetary Policy Forum, Taylor noted that the Bank should consider cutting rates if the Middle East conflict eases and energy prices fall. He was part of the seven-to-two majority that voted to hold rates at 3.75% last month. Two members, Megan Greene and Huw Pill, preferred a hike to 4%.
“Until we have greater certainty, an extended hold at this level is the correct and appropriately measured policy response,” Taylor said. He pointed to geopolitical factors like the Middle East crisis and tariffs as key influences on interest rate decisions.
“Geopolitics is now driving economic outcomes, and hence monetary policy,” Taylor added. “It is a very uncomfortable place to be, but the reality we must face. We must watch both economic and geopolitical developments carefully and be ready to act in either direction.”
Taylor stressed that the risk of high inflation would drop significantly if peace is achieved in the Middle East. In that case, he said policymakers should be ready to cut rates. “If that benign scenario plays out, interest rates can and should resume their downward path to neutral,” he said.