By Paul Hannon

Restrictive borrowing costs are weighing on services prices and U.K. inflation may be lower than previously expected, Bank of England Deputy Gov. David Ramsden said Friday.

Ramsden was one of eight rate setters who voted to leave the BOE's key interest rate at a 16-year high in March. But comments in a speech delivered in Washington, D.C. suggest he may soon consider a vote to lower borrowing costs.

The BOE has highlighted services prices as a key worry, since they could reflect rapid wage growth and drive a rebound in inflation as energy prices level off. However, Ramsden said there are now signs that services prices are also starting to cool.

"The restrictive stance of policy and the more symmetric unwinding of second-round effects are also reducing the more persistent components of inflation such as services inflation," he said on the sidelines of meetings at the International Monetary Fund.

Ramsden said the risks to the BOE's inflation forecast from developments within the U.K. are now "tilted to the downside," and consumer prices may rise at around the BOE's target rate of 2% into 2025, rather than accelerate to 3% as the central bank expected.

Ramsden said that could prompt a change of policy.

"I will continue to take a watchful and responsive approach to my policy decisions," he said. "Watchful, in terms of assessing the evidence as it accumulates, and responsive in terms of the stance of monetary policy warranted by the evidence."

Ramsden also noted that the U.K. now has an inflation rate that is close to those of its peers, having lagged last year.

"The U.K. looks like less of an outlier in terms of recent inflation performance and more of a laggard," he said.

"And one that is catching up fast."

Write to Paul Hannon at

(END) Dow Jones Newswires

04-19-24 1110ET