Bank of England policymaker Alan Taylor has played down concerns over April’s inflation rebound, calling it “one-off noise” that should not deter the Bank from easing rates this summer.
In an interview published by the Financial Times this morning (Friday 30 May), the Monetary Policy Committee’s most dovish member said April’s CPI rise to 3.5% — up from 3.1% in March — “overstates underlying pressure” and reflects transitory factors like energy price-cap resets and annual water-charge increases.
“These effects will roll out of the year-on-year calculation quickly,” Taylor said, pointing instead to forward indicators such as wage growth and input cost surveys that suggest a continued disinflationary trend through the summer.
Markets had trimmed the probability of a rate cut at the Bank’s 13 June meeting to around 45% following the CPI release. But Taylor’s comments — coupled with a weaker-than-expected CBI services sector survey on Thursday — pushed odds back above 60%, with two-year gilt yields dipping four basis points to 3.52% and rate-sensitive stocks leading the FTSE 350 higher.
Taylor also warned that the MPC’s “stronger-for-longer” rate stance risks overtightening if global demand falters. He cited Lloyds Bank’s latest business barometer, which showed that only a third of UK firms now plan pay rises above 3 % — down from 55% a year ago.
Economists increasingly expect two to three quarter-point cuts by the end of 2025, contingent on services inflation falling below 5% in the coming months. While Chief Economist Huw Pill has struck a more cautious tone, the Bank’s own May Monetary Policy Report forecasts CPI returning to the 2 % target by early 2026 if monetary policy loosens gradually.
