The Bank of England should maintain interest rates at their current level until there is more certainty regarding the economic outlook, a rate-setter at the central bank has said.
Alan Taylor, a member of the Bank’s Monetary Policy Committee (MPC), called for an “extended hold” in the face of potential economic risks.
However, he added that the Bank should look at possible cuts if the conflict in the Middle East calms and energy prices sink.
The comments came amid a speech by Mr Taylor, who joined the Bank in 2024, at the Barclays-CEPR Monetary Policy Forum.
He was among a seven-to-two majority as the MPC voted in favour of keeping interest rates at 3.75% last month.
Two members – Megan Greene and Huw Pill – preferred to hike interest rates to 4%.
On Tuesday, Mr Taylor said: “Until we have greater certainty, then, an extended hold at this level is, to me, very much the correct and appropriately measured policy response we need, given the balance of risks.”
He highlighted that geopolitical factors, such as the conflict in the Middle East and tariffs, are impacting the path of interest rates.
“To conclude, geopolitics is now driving economic outcomes, and hence monetary policy,” Mr Taylor said.
“It is a very uncomfortable and unwelcome place to be, but the reality we must face.
“So we must watch both economic and geopolitical developments carefully and be ready to act in either direction, as necessary.”
The rate-setter however stressed that the risk of elevated inflation will ease significantly if there is a peaceful solution in the Middle East.
He indicated that policy-makers should look to bring down interest rates in that scenario.
Mr Taylor said: “If something closer to that benign scenario plays out, we must be ready to act.
“In my view, interest rates can and should resume their downward path to neutral.”