Bank of England Could Face Weak Demand Risk as Inflation Eases, Policymaker Says
A Bank of England policymaker has warned that the UK economy may soon shift from battling inflation to confronting weak demand, as price pressures continue to ease.
Speaking at a conference hosted by Norway’s central bank in Oslo, Monetary Policy Committee member Alan Taylor said the UK could soon move beyond the traditional trade-off between slowing growth and inflation.
«I judge that we will soon find ourselves largely outside of trade-off territory – and even at risk of entering the familiar realm of deficient demand,» Taylor said.
He noted that inflation has consistently come in below Bank of England forecasts through 2025 and into 2026. At the same time, unemployment has risen and wage growth has slowed, suggesting diminishing inflationary pressures.
Taylor was among a minority of MPC members who voted last month to cut interest rates to 3.5% from 3.75%. At the time, he warned that inflation could persistently undershoot the central bank’s 2% target if demand weakens further.
His comments highlight growing debate within the Bank over the timing of future rate cuts as policymakers balance fragile economic growth against cooling inflation.
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