A vice governor of the Bank of England has said that “caution remains appropriate” in fiscal policy decisions despite a deceleration in the United Kingdom inflation in recent months.
Salaries are still growing too fast for inflation to reduce the 2%target, said Clare Lombardelli, deputy governor of monetary policy.
He also warned that global growth will be beaten by US rates plans, which will also reduce inflation.
Last week, Mrs. Lombardelli was among the members of the Bank's monetary policy committee (MPC) that agreed to reduce the interest rates of the United Kingdom to 4.25%, the lowest level for two years.
The bank also increased its prognosis of economic growth by 2025 after a solid start of the year, but reduced the growth prospects for next year.
On Monday, the Vice Governor told the Conference of the Bank of Observers of England in London that he was “balanced between the retention and reduction rates”, but that he finally supported a cut in the midst of the “gradual defilment.”
The most recent official figures showed that the United Kingdom inflation slowed down to 2.6% in March, from 2.8% in February, bringing it to the government and the objective rate of 2% of the bank.
However, inflation is expected to be accelerated to around 3.4% in April after a jump in public energy and services.
Recent data also showed that the average weekly salary grew 5.9% during the three months until February.
Mrs. Lombardelli said: “Monetary policy remains restrictive and the current position reflects a balance between the need to continue squeezing the underlying inflationary pressure and managing the risks of a lower demand in the economy.
“Salary growth is still too high to be consistent with inflation in the objective.
“Caution remains appropriate. I will be more comfortable when I see the slowdown in the data in the data for a longer period.”
He added that recent US tariff plans and the largest worldwide commercial tensions could press the lower United Kingdom inflation.
Mrs. Lombardelli said: “The highest rates and the most uncertain policies of the United States will probably reduce growth and inflation on the relevant horizon of policies due to the reduction of demand and commercial diversion of the reduction of exports by the rest of the world to the United States.
“The movements of the exchange rate we have seen support greater inflation imported to the United Kingdom, although exchange rates can change in response to commercial policies and the evolution of the feeling of global risk.”
Meanwhile, his MPC member partner, Megan Greene, also said he had some concerns about the persistence of inflation in the United Kingdom.
“There is a feeling that perhaps households in particular are a bit more sensitive to increases in inflation,” he said in a panel at the vigilant conference.
“What is a little more worrying for me is that medium -term inflation expectations have also started working.”
Also playing recent commercial policy, Mrs. Greene said that the greatest uncertainty that leads to companies that adopt a “wait and see” approach “has a” growth cooling effect “on the economy.
Mrs. Greene, who also voted for a reduction in the rate of percentage points of 0.25 on Thursday, said she had been “quite torn” about whether to reduce rates or keep them equal, balancing concerns about inflation expectations with the impact on commercial policy.
But the politician insisted that his decision had not changed if he had known about the new commercial agreements that the United States has hit with the United Kingdom and China since then.
She added that she was “worried that the commercial diversion could be more uninflating than us in our inflation forecasts, and I think that is still the case, even if China's tariffs and the United States are lower for 90 days.”
Alan Taylor, another MPC member, who at the beginning of May voted for a half -point cut, added Monday afternoon that he also thought that rates would reduce inflation.
He said that global uncertainty “will amplify the wait and see and see the precautionary dynamics for homes and companies everywhere, not only here.”
“But also, what is more important, the commercial diversion mechanism where … United States is a country of deficit in the world, so there are surplus countries that try to obtain their products in the short term.”
He added: “Where are those exports to land? That will press us down and in our import prices.”
Taylor said: “I am putting a lot of weight in the news of the last month, because it has been great news. And I think the international dimension for me is quite dangerous, at this time.”
