Published : 2 days ago, on 06/12/2024

By David Milliken

(Reuters) -The Bank of England needs to cut interest rates further as its policy stance is still very restrictive and is hurting living standards, business investment and potentially longer-term productivity, policymaker Swati Dhingra said on Friday.

“A combination of all of those factors – the weak consumption, the weak investment and possible damage to supply capacity – is what I would worry about. And that’s why I think we should be easing policy more,” she told Bloomberg Television.

Dhingra joined the BoE’s Monetary Policy Committee in August 2022 and consistently voted for a slower pace of tightening than her MPC colleagues before starting to vote for rate cuts in February this year, six months before the majority backed a cut.

However, she said that outside of emergencies like the COVID-19 pandemic she backed a “gradual” approach to changing rates – the same language as used by BoE Governor Andrew Bailey.

“Most of the time gradual is better because it gives people certainty to plan ahead,” she said.

Financial markets do not expect the BoE to cut interest meetings at its next meeting on Dec. 19 and see 0.71 percentage points of cuts in 2025 – a slower pace of loosening than either the European Central Bank or the U.S. Federal Reserve.

Dhingra said Britain faced limited options to carve out an independent trade policy in response to any tariffs imposed by U.S. President-elect Donald Trump.

“Large trade partners tend to have much more bargaining power than small trade partners, and that’s something we have to face up to,” she said.

If the U.S. is going to put up trade barriers and there’s going to be retaliatory action from everyone else, I think it’s a really important moment to ensure that … it’s an orderly fragmentation and not a disorderly fragmentation.”

MPC member Megan Greene said on Thursday that Britain might have to choose between ties with the European Union and the United States.

Some economists have said that Britain might enjoy cheaper imports and lower inflation if U.S. tariffs lead to Chinese exports being diverted to Britain.

Dhingra said that in the longer term she feared any benefit from this would be outweighed by damage to economic productivity caused by disrupted supply chains and pressure on some British businesses to avoid Chinese suppliers.

(Reporting by David MillikenWriting by Andy BruceEditing by Peter Graff)