By Paul Hannon
The Bank of England will likely lower borrowing costs gradually in the months ahead, but should remain "vigilant" for signs of an economic slowdown that could require it to move more rapidly, Deputy Governor Clare Lombardelli said.
In a speech Monday, Lombardelli said there are signs that wages are cooling more slowly than earlier in the year, and that it is therefore "too early" to declare victory on inflation.
"The outlook for wages and services prices is unclear from here," she said. "This is why I support a gradual removal of monetary policy restriction."
Earlier this month, the BOE lowered its key rate for a second time this year. But it has cut rates more slowly than have the Federal Reserve and the European Central Bank, and has said it will continue to move cautiously.
However, Lombardelli said there is a risk that the U.K. economy will grow more slowly than expected. A survey of purchasing managers released Friday pointed to a decline in business activity during November.
"We have seen some slowing in other countries in Europe and need to be vigilant to it as the U.K. shares some similarities with other European economies," she said.
Should the economy show signs of unanticipated weakness, the BOE may move more quickly to lower borrowing costs, she said.
"Given the lags in policy it would be important not to act late if the economy moved in this direction," said Lombardelli.
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
11-25-24 0440ET
