UK Monetary Policy Report Hearings

post: BoE's Pill: The evidence points against more rapid cuts in bank rate for me. post: BoE's Pill: There is more work to do to squeeze out underlying inflation. post: BOE'S PILL: FURTHER PROGRESS IN DISINFALTION WOULD PERMIT FURTHER RATE CUTS THIS YEAR SIZE AND PACE OF RATE CUTS WILL DEPEND ON HOW INFLATION RISKS EVOLVE

post: BoE Gov. Bailey: The vote for a cut was based on the disinflation story holding. post: BoE Gov. Bailey: We do expect a pick-up in inflation, it will be nothing like a few years ago. post: BoE Gov. Bailey: I think it's less likely we will get 2nd round inflation effects due to the weakening economy. post: BoE Gov. Bailey: The outlook is uncertain, I see risk as two-sided.

post: Boe's Taylor: We should still be normalizing policy gradually. post: BANK OF ENGLAND MPC'S TAYLOR: WE PROBABLY HAVE A BIT MORE OF AN OUTPUT GAP THAN IN BOE FEB MPR post: *BOE'S TAYLOR: BUSINESSES, CONSUMERS PUTTING OFF SPENDING post: Boe's Taylor: I strongly argued for use of words gradual and careful. post: Boe's Taylor: Every meeting of the MPC will be a live one for rate moves.

I wanted to get back to you with some thoughts about the possible impact of the increase in employer National Insurance Contributions (NICs) in the Autumn Budget. As set out in the February 2025 Monetary Policy Report, the Monetary Policy Committee (MPC) continues to judge that firms are likely to use a number of different channels in response to the change in NICs. Based on the costing provided by the Office for Budget Responsibility (OBR), Bank staff estimate that the change works to increase firms’ employment costs by just short of 2%. Firms may choose to absorb this increase in costs within their profit margins, pass on the cost to consumers through higher prices, or mitigate the impact by reducing nominal wages or employment. Evidence from both the Bank’s Decision Maker Panel (DMP) Survey and Agents’ annual pay survey suggests that firms will respond through all of these channels. Taking this evidence into account, the increase in employer NICs contributes between 0.1 and 0.2 percentage point to the projected 1 percentage point near-term rise in consumer price inflation in the MPC’s February forecast. post: BoE Gov. Bailey: UK's Chancellor Reeves' NI hike lifts firms' jobs costs 2%. post: BoE Gov. Bailey: The NI hike is to lift inflation by 0.1-0.2 percentage points.

post: BoE’s Greene: It’s less likely that inflation persistence will fade on its own accord. post: BoE’s Greene: It is more likely that monetary policy will need to remain restrictive. post: BoE’s Greene: I have advocated for a gradual path for removing monetary policy restrictiveness and external communications that are clear and reflect caution. post: BoE’s Greene: This year is likely to be the fifth consecutive year in which inflation remains above target.Greene: Annual Report to the Treasury Select Committee This report covers the period since I joined the Monetary Policy Committee on 5 July 2023. I joined the MPC off the back of what turned out to be our last 50 basis point rate increase in the latest rate hiking cycle. This decision in June 2023 had been motivated by the dual upside surprises in CPI inflation and private sector regular pay, both of which remained around 8 per cent as I joined the committee. The successive shocks of a pandemic and the Russian invasion of Ukraine had generated second round effects and inflation persistence beyond what our models could explain. We have come a long way towards bringing inflation sustainably towards our inflation target since then. My voting record reflects the high importance I have placed on squeezing inflation persistence out of the economy. Our indicators of inflation persistence have been moving in the right direction partly because of our restrictive monetary stance, and I think the overall disinflationary path embedded in our forecast is broadly on track. This motivated my first vote to remove monetary restrictiveness in November 2024 even though some indicators of inflation persistence, such as services inflation and wage growth, remained elevated above levels consistent with our 2% inflation target. Since then, I have advocated for a gradual path for removing monetary policy restrictiveness and external communications that are clear and reflect caution. My colleagues and I are committed to fulfilling the Monetary Policy Committee’s remit to bring inflation to target sustainably in the medium term. This year is likely to be the fifth consecutive year in which inflation remains above our target. There is a ris

post: BOE'S BAILEY: **TIERING WOULD BE A TAX ON UK BANKING SYSTEM **TIERING OF BOE RESERVES WOULD BE A FISCAL DECISION, NOT A MONETARY POLICY OR FINANCIAL STABILITY ONE post: BOE'S BAILEY: **THERE IS NO BIG WORK PROGRAMME GOING ON TO TIER REMUNERATION OF RESERVES **TIERING RESERVES IS A DECISION FOR GOVERNMENT, NOT US, IT IS CONTRARY TO OUR OBJECTIVES

post: BANK OF ENGLAND MPC'S TAYLOR: DISINLFATION IS UNFOLDING AS WE WOULD EXPECT post: BOE MPC'S TAYLOR: THERE IS A WIDE RANGE OF POSSIBILITY FOR BOE RATE CUTS, DEPENDS ON HOW THE DATA UNFOLDS. post: BANK OF ENGLAND MPC'S TAYLOR: **LABOUR MARKET DATA KEY FOR MY VIEW ON RATE CUTS **'GRADUAL' RATE CUTS IS CLOSELY ALIGNED TO MARKET CURVE CURRENTLY, ABOUT 100 BPS OVER NEXT YEAR **THAT IS NOT NECESSARILY WHAT WILL UNFOLD, DEPENDING ON ECONOMIC CONDITIONS