Swati Dhingra, a member of the Bank of England’s (BoE) Monetary Policy Committee (MPC), has called for additional interest rate cuts, warning that the central bank’s restrictive stance is adversely affecting living standards, business investment, and long-term productivity.
“A combination of weak consumption, lackluster investment, and potential damage to supply capacity is concerning,” Dhingra said in an interview with Bloomberg Television on Friday. “That’s why I believe we should be easing policy further.”
Dhingra, who has consistently advocated for more dovish monetary policies since joining the MPC in August 2022, emphasized the importance of a “gradual” approach to rate changes, aligning with BoE Governor Andrew Bailey’s views.
Policy Outlook and Market Expectations
While financial markets do not anticipate rate cuts at the BoE’s upcoming meeting on December 19, they forecast a total of 0.71 percentage points in cuts by 2025. This represents a slower pace compared to the European Central Bank and the U.S. Federal Reserve, which have been quicker in loosening their monetary policies.
Dhingra warned that the current restrictive policy stance could hinder Britain’s economic resilience, adding, “Gradual changes in policy provide stability, allowing businesses and households to plan effectively.”
Trade Policy Challenges Amid U.S. Tariff Threats
Dhingra also addressed the challenges posed by potential trade policy shifts under U.S. President-elect Donald Trump. She cautioned that Britain’s ability to craft an independent trade strategy is constrained by the disproportionate bargaining power of larger trade partners.
“If the U.S. imposes trade barriers and retaliation ensues, ensuring an orderly fragmentation rather than a chaotic one will be critical,” she said.
This comes amid growing concerns over Britain’s economic ties with key partners. Fellow MPC member Megan Greene suggested on Thursday that the UK may soon face a pivotal choice between closer alignment with the European Union or the United States.
Long-Term Impacts on Productivity
Dhingra expressed skepticism over the potential short-term benefits of cheaper imports due to redirected Chinese exports in response to U.S. tariffs. She argued that any gains would likely be offset by long-term harm to economic productivity caused by disrupted supply chains and increased pressure on British firms to diversify away from Chinese suppliers.
