Bank of England's Alan Taylor, known for his dovish stance, has called on his Monetary Policy Committee colleagues to vote for swifter interest rate cuts to ensure a "soft landing" on the inflation trajectory.
In June, bank officials decided to maintain interest rates at 4.25 per cent, with inflation rebounding to 3.4 per cent in April and May. Taylor, along with deputy governor Dave Ramsden and fellow external member Swati Dhingra, voted for a cut of 25 basis points, as reported by .
During a speech in Portugal, Taylor encouraged the other six voters to consider the impact that global trade tensions have had on demand, given their effect on growth.
Taylor argued that the anticipated slump in demand due to a higher global average tariff rate should prompt rate-setters to vote for additional cuts to steer price growth down to the Bank's two per cent target.
"Previously, I had seen a º£½ÇÊÓƵ soft landing in the cards, with some remaining upside risks to inflation from the bump in 2025," Taylor stated.
"Now I see that soft landing as being at risk, and greater probability of a downside scenario in 2026 pushing us off track as demand weakness and trade disruptions build."
Taylor suggested that energy shocks remain a "big unknown" given a recent surge and drop in oil prices following missile exchanges between Israel and Iran over a fortnight.
He also proposed that Chancellor Rachel Reeves' tax increases on employers, which came into effect in April, would "fade out in the new year".
Concerns over a potential weakening of the labour market have prompted the Bank to contemplate hastening its cycle of interest rate reductions.
Taylor also suggested that the Bank should downplay its central forecasts, and that the Monetary Policy Committee (MPC) ought to find a method to convey long-term expectations for interest rates.
The Bank's practice of signalling its policy stance with the term "gradual and careful" has faced criticism from various economists.
"I wouldn't say we were particular fans of this word salad they were using last time, that 'careful and gradual' [phrasing]. Certainly, I don't think we think it's particularly important or a particularly good way of signaling things. But obviously the MPC thinks it is a very important way of doing it," Andrew Goodwin of Oxford Economics expressed to City AM in May.
These remarks from Taylor emerge as Governor Andrew Bailey adopts a more cautious approach towards interest rates, indicating a "softening" in the labour market, with job vacancies decreasing and unemployment edging up to 4.6 percent.
Bailey has also highlighted that business investment decisions are being postponed, while global unrest has had a diminishing impact on his decisions due to the unpredictability of policies introduced by President Trump and other world leaders.
"Because of the sheer unpredictability, it's not that I'm ignoring the world, but I'm not putting that higher weight on it, because, frankly, it is so unpredictable at the moment that, as we saw in the last 24 hours, it can easily change overnight."
