Rising wages may slow pace of rate cuts: BoE Ramsden  

Rising wages may slow the pace of the Bank of England’s base rate cuts, said the central bank’s deputy governor Dave Ramsden.  

His comments come after wage growth accelerated to 6.2% in the private sector and 4.7% in the public sector, according to official data. 

This puts private pay growth rising three times as fast as the Bank’s 2% inflation target. 

“That was a concerning development for me,” said Ramsden speaking at Stellenbosch University near Cape Town. 

“I no longer think that risks to hitting the 2% inflation target sustainably in the medium term are to the downside. 

“Instead, I think they are two-sided, reflecting the potential for more inflationary as well as disinflationary scenarios.” 

His comments come after the Bank’s nine-strong Monetary Policy Committee – which Ramsden sits on — cut the base rate by 0.25% to 4.5% earlier this month, amid signs that the UK economy is struggling. 

Bank of England governor Andrew Bailey said it would adopt a “gradual and careful” approach to rate cuts, which many in the City take to mean at least two more rate cuts this year. 

The committee also forecast that inflation, currently at 3%, will rise to 3.7% in the third quarter of this year, before receding. 

Goldman Sach analyst Sharon Bell said that since Chancellor Rachel Reeves’ October Budget the UK has seen firms cuts jobs, raise prices and pay their remaining staff more. 

“This tendency to raise prices, along with higher energy costs and VAT on school fees, has pushed up headline inflation,” added Bell in a note to investors.

Ramsden also pointed out that the threat of global tariff wars, sparked by US President Donald Trump, is a new factor rate-setters must consider. 

He said: “There is significant uncertainty around the next steps the current US administration will take with regards to tariffs, and the potential actions of other countries in response. 

“At present, we do not have any specific enough information to build into our forecasting models. However, it is clear that uncertainty about global trade policy is already heightened.” 

Ramsden voted with the majority of the Monetary Policy Committee to cut bank rate this month. Two MPC members, Swati Dhingra and Catherine Mann, voted for a larger 0.50% cut. 

But at the previous meeting in December, Ramsden had been part of a dovish minority who voted for a 0.25% cut when the majority of the committee wanted to keep rates on hold.

Earlier this week Dhingra said Bank of England policymakers are clashing over whether “gradual” base rate reductions should limit them to one base rate cut every three months.