"My focus, and indeed the focus of many on the MPC, has shifted to thinking about how long rates need to remain at their current level."
- Sarah Breeden, deputy governor of financial stability
Sarah Breeden, deputy governor of financial stability at the Bank of England, has said that "things are moving in the right direction" regarding inflation and that several members of the Bank's Monetary Policy Committee are now "thinking about how long rates need to remain at their current level".
Breeden, a member of the MPC, said in a December speech that inflation "was the more important scenario to lean against when setting monetary policy".
Headline CPI inflation ended the year at 4.0% in December – over half a percentage point lower than the Bank expected and down from a peak of over 11% in October 2022. Breen said lower-than-expected inflation – which was broad-based across lower fuel, core goods and services inflation – "was a very welcome sign that things are moving in the right direction".
She added: "As I have become more confident that persistence is likely to evolve as embodied within our forecast, I have become less concerned that rates might need to be tightened further. Instead my focus, and indeed the focus of many on the MPC, has shifted to thinking about how long rates need to remain at their current level."
The MPC voted 6-3 to hold interest rates at 5.25% earlier this month. Two members voted to increase Bank Rate by 0.25 percentage points, while one member preferred to reduce Bank Rate by 0.25 percentage points - the first vote for a cut since the pandemic started almost four years ago.
Interest rates have now been at 5.25% since August 2023, with many economists predicting that rates will begin to fall later this year.
However, in a recent survey of industry experts, 70% did not expect the base rate to fall until at least 20th June, with 50% predicting the MPC will choose to lower rates in the June meeting, and 20% believing that the base rate will not be brought down until the following meeting on 1st August.