BoE’s Taylor Signals Further Rate Cuts as Inflation Nears Target

Interest rates set by the Bank of England are likely to keep moving lower as inflation appears on track to return to the central bank’s 2 per cent goal sooner than previously expected, according to comments made by policymaker Alan Taylor on Wednesday.

Speaking in prepared remarks for an event at the National University of Singapore, Taylor said the inflation outlook had improved notably compared with earlier projections. “We can now see inflation at target in mid-2026, rather than having to wait until 2027 as in our previous projection,” he said in the text of his speech.

Taylor added that the decline in inflation looked durable, pointing to easing pressures in the labour market. “I see this as sustainable, given cooling wage growth, and I now therefore expect monetary policy to normalise at neutral sooner rather than later….Interest rates should continue on a downward path, that is if my outlook continues to match up with the data, as it has done over the past year,” he said.

The comments come after Taylor was among a five-member majority on the Bank of England’s Monetary Policy Committee that voted in December to lower the benchmark interest rate to 3.75 per cent from 4 per cent. The remaining four MPC members argued for keeping borrowing costs unchanged.

Bank of England Governor Andrew Bailey has also struck a more optimistic tone on inflation, noting recently that price growth, which was 3.2 per cent in the latest data, could ease to around “2 per cent in April or May this year.” Financial markets are now close to pricing in two additional quarter-point interest rate cuts by the BoE in 2026.

In his Wednesday speech, Taylor also addressed the broader global backdrop, focusing in particular on international trade. He said he expected global trade to recover over the longer term from a series of recent shocks, including import tariffs imposed by U.S. President Donald Trump, which would help to ease inflationary pressures.

“Smoother international trade is, at the end of the day, a positive supply shock – for those countries who choose to participate, at least,” Taylor said.

By fLEXI tEAM