BoE official warned of long-term period of high interest rates

Alan Taylor, a member of the Bank of England's Monetary Policy Committee, noted possible maintaining of interest rates at a high level for a long time. Despite the recent 0,5 percentage point rate cut, he emphasized that the UK economy is still far from reaching a neutral level of borrowing costs.

According to Taylor’s opinion, Donald Trump’s tariff policy creates serious risks for the economy of the UK, forming disinflationary pressure via the redirection of trade flows from the US. At the same time, the emerging global uncertainty will continue to restrain domestic economic activity.

In determining future monetary policy, Taylor emphasized the key role of the neutral interest rate, which he estimated to be in the range of 2,75–3%. This value is an important benchmark for understanding the degree of restrictiveness of the current cost of borrowing.

As Bloomberg notes, members of the Monetary Policy Committee demonstrate a significant difference of opinion on further actions of the regulator. This uncertainty is caused by the difficult economic situation and contradictory signals from the markets.