Interest rates set by the Bank of England are likely to keep moving lower as inflation appears on track to settle close to the central bank’s 2% target, according to BoE policymaker Alan Taylor.
Speaking in remarks prepared for delivery at the National University of Singapore on Wednesday, Taylor said inflation is now expected to return to target by mid-2026, earlier than the bank’s previous projection of 2027.
“We can now see inflation at target in mid-2026, rather than having to wait until 2027 as in our previous projection,” he said. “I see this as sustainable, given cooling wage growth, and I therefore expect monetary policy to normalise towards a neutral stance sooner rather than later. Interest rates should continue on a downward path, provided my outlook continues to align with the data, as it has over the past year.”
Taylor was among the five members of the Monetary Policy Committee who voted in December to cut the BoE’s benchmark interest rate to 3.75% from 4%, while four members preferred to keep rates unchanged.
BoE Governor Andrew Bailey has previously indicated that inflation, which stood at 3.2% in its latest reading, could fall to around 2% by April or May this year. Financial markets are now close to pricing in two additional quarter-point rate cuts by the Bank of England in 2026.
In his speech, Taylor also highlighted the longer-term outlook for global trade, suggesting it could recover from recent shocks — including U.S. President Donald Trump’s import tariffs — and help ease inflationary pressures.
“Smoother international trade is, at the end of the day, a positive supply shock — for those countries that choose to participate, at least,” he said.
