The Bank of England (BoE) should lower interest rates further as its current policy stance remains overly restrictive, harming living standards, business investment, and potentially the UK’s long-term productivity, Monetary Policy Committee (MPC) member Swati Dhingra warned on Friday.
Speaking to Bloomberg Television, Dhingra said:
“A combination of weak consumption, weak investment, and possible damage to supply capacity is what I would worry about. That’s why I think we should be easing policy more.”
Since joining the MPC in August 2022, Dhingra has consistently advocated for a more cautious approach to rate tightening. She began voting for rate cuts in February 2023, months before the majority of her colleagues backed such moves.
Despite her call for further easing, Dhingra emphasised the importance of a “gradual” approach to rate changes, echoing similar statements by BoE Governor Andrew Bailey. “Most of the time, gradual is better because it gives people certainty to plan ahead,” she said.
The BoE is not expected to announce a rate cut at its next meeting on 19 December. Markets anticipate only a modest reduction of 0.71 percentage points in 2025, a slower pace of loosening compared to the European Central Bank and the US Federal Reserve.
In addition to monetary policy, Dhingra highlighted challenges facing the UK’s trade policy, particularly in response to potential tariffs imposed by US 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 noted. Dhingra warned of the risks of “disorderly fragmentation” in global trade if retaliatory tariffs disrupt supply chains.
MPC member Megan Greene also recently weighed in, suggesting that Britain may have to choose between closer economic ties with the European Union or the United States.
While some economists believe Britain could benefit from lower inflation through cheaper imports if US tariffs redirect Chinese goods to the UK, Dhingra expressed concerns about the long-term impact.
She argued that such benefits would likely be outweighed by damage to economic productivity caused by fragmented supply chains and the pressure on UK businesses to avoid Chinese suppliers.
As the BoE prepares for its December meeting, Dhingra’s warnings underscore the delicate balancing act between managing inflation and safeguarding economic growth amid global trade uncertainties.
