Bank of England rate-setter casts doubt on August cut

Hopes of a summer interest rate cut have been knocked by a member of the Bank of England’s rate-setting committee.

Jonathan Haskel said he wanted to keep interest rates on hold because inflation pressures remain in the jobs market, according to the text of a speech he is due to deliver at King’s College London later on Monday.

The document, released by the Bank, said Mr Haskel would declare: “The labour market continues to be tight, and I worry it is still impaired.

“I would rather hold rates until there is more certainty that underlying inflationary pressures have subsided sustainably.”

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Mr Haskel is considered the chief hawk on the nine-member monetary policy committee (MPC) – a ‘hawk’ being defined as one more likely to swoop to stamp out inflation while ‘doves’ are more inclined to seek lower interest rates.

He had been among members, until February this year, arguing for the Bank rate to go up from its current level of 5.25%.

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His call for caution ahead of the next rate decision on 1 August flies in the face of financial market opinion and that of many economists.

On Monday, 60% of bets were for a rate cut to 5%, according to LSEG data.

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That August meeting will be Mr Haskel’s last as his second term on the MPC is due to conclude at the end of August.

His nominated successor is yet to be announced.

As an external member of the MPC – that is one who is not employed by the Bank – the appointment falls to new chancellor Rachel Reeves.

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She has prioritised economic growth and may be tempted to opt for a more dovish figure.

A rate cut – following seven consecutive decisions to hold – would help businesses and consumers hurt by the battle against the pace of price increases through rising borrowing costs.

On the face of it, there is no reason for the Bank to wait because the consumer prices index (CPI) measure of inflation returned to the Bank’s 2% target last month for the first time since 2021.

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However, basic wage growth remains at 6% – roughly double the rate most policymakers view as consistent with 2% inflation.

Services inflation is also stubbornly high.

Bank governor Andrew Bailey has emphasised inflation must be sustainably close to target before the Bank acts.

Projections by its staff see a lift upwards for CPI in the second half of the year.

The governor has indicated repeatedly that progress has been made against inflation and the next movement for the Bank rate will almost certainly be down barring further inflation shocks.

There is one final set of employment and inflation figures ahead of the MPC’s August meeting.

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